An MP who investigates issues of consumer protection has urged insurance companies to “do the right thing” and payout to people whose plans have been disrupted by the COVID-19 pandemic.
“I think insurers should do the right thing and follow the spirit of the policy not just the letter,” Labour MP Yvonne Fovargue told Yahoo Finance UK.
Fovargue is chair of the All Party Parliamentary Group for consumer protection. She promised to raise the issue of insurance payouts with the group and write to the UK’s finance watchdog — the Financial Conduct Authority (FCA) — for more information.
It comes as people across the country struggle to claim insurance payouts for cancelled holidays, events, and weddings.
Yahoo Finance UK has highlighted the plight of many engaged couples left unable to claim for cancelled weddings. Insurers argue that despite policy wording covering infectious diseases, couples aren’t covered because cancellations were due to the government-ordered lockdown, not an outbreak of COVID-19 at the venue.
Fovargue said this argument was “sophistry.”
“The government action was taken because of the pandemic,” she said. “It’s basically weaselling their way out of it.”
Fovargue said she was aware of many more people who were struggling to claim on travel insurance. Insurers argue that the unprecedented nature of the COVID-19 pandemic means policies don’t cover it.
“I think we need to be looking at the whole insurance industry,” Fovargue, a former Labour party shadow cabinet member, said.
The FCA has issued guidance to insurers calling on them to treat customers fairly and be mindful of the exceptional circumstances. However, the regulator has left it largely up to the discretion of underwriters when it comes to deciding on payouts.
Many of couples who spoke to Yahoo Finance UK who were unable to claim wedding insurance are now considering challenging the decisions with the Financial Ombudsman.
Business owners are also struggling to claim from insurers. The FCA is taking a more active role in this market and has brought a court case to determine whether “business interruption” policies cover the pandemic. Interim FCA chief executive Chris Woolard said the case would provide “clarity and certainty” in an update on the proceedings on Monday (1 June).
Read more: COVID-19 pandemic to cost insurers $200bn
For its part, the insurance industry argues it is already facing historically large payouts. Lloyd’s of London, the world’s largest insurance market, said the industry could lose a record $200bn (£162bn) as a result of the pandemic.
A spokesperson for the Association of British Insurers told the Treasury Select Committee in March that its members were set to pay out a record £275m ($339m) on travel insurance claims this year as a result of COVID-19. Figures for the wedding insurance market are not available.