Insurers can't use lockdown as excuse to reject claims, says regulator

The FSCA says businesses interrupted by the lockdown have valid claims.
The FSCA says businesses interrupted by the lockdown have valid claims.
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  • Financial Sector Conduct Authority says if a policyholder has a policy that covers infectious disease and can prove that they suffered a loss because of measures taken to prevent the spread of such a disease, including the lockdown, they have a valid claim.
  • Many insurers, on the other hand, argue that a lockdown is not a trigger for business interruption claims.
  • The FCSA says it may issue specific directives to non-compliant insurers.


The financial services regulator has said some insurers are deliberately avoiding paying business interruption claims where no grounds exist to do so.

The Financial Sector Conduct Authority (FSCA) said on Thursday that "the National Lockdown cannot be used by any insurer as grounds to reject a claim".

"Such conduct goes against the principles of treating customers fairly and breaks down confidence and trust in the insurance sector. The FSCA has communicated this view to insurers and will take action against those that do not treat their customers fairly," it said.

The regulator added that it may issue specific directives to insurers who seem to be non-compliant.

The FSCA has always taken insurers to task about treating their customers fairly by not giving them the runaround when they claim. But the last communication that it sent to the industry on 19 June seemed to accept insurers' argument then that the lockdown is not covered by most business interruption policies. In that communication, the FSCA said it was "of the firm view that the national lockdown was not intended and cannot reasonably be interpreted to be a trigger" for business insurance claims.

But on Thursday, the regulator said that in communication, it had also made clear that policyholders can claim in instances where they can show that they have satisfied the requirements of their specific policy, whether this was before, during or after the lockdown.

"In other words, the national lockdown cannot be used by any insurer as a ground to reject a claim. If a policyholder has a [business interruption] policy with a radius clause and such policyholder can prove that it suffered a loss, for example, less bookings, cancellations of bookings and so forth as a result of the contagious/infectious disease in the area specified in the radius clause, and its business was interrupted or interfered with as a result of measures taken as a consequence of the contagious/infectious disease, including the national lockdown, then the policyholder has a valid claim," wrote the FSCA in a statement.

It added that Covid-19 started spreading in the country before SA went on lockdown.

The regulator's statement pulls apart the defence of some of the country's large insurers, who say that even if they cover contagious diseases, the lockdown a direct cause of their clients' losses and not a peril covered by their policies.

Specialist public loss adjustment, Insurance Claims Africa (ICA) said the FSCA's statement has provided much needed clarity and is a step in the right direction.

"ICA believes that the insurers should not act contrary to their controlling authorities' directives. To do so would increase the public's already poor impression of those insurers not paying these claims," said ICA CEO, Ryan Woolley. 

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