Regulation in the time of Covid: Part 3 (12) 19/1 - BI Insurance final judgement
Gavin Stewart
Writer, Commentator on financial regulation; Former regulator; Ex-international rower & Sports Administrator. My latest novel, "An Endless Chain", can be ordered at Olympia Publishers, as well as via Amazon and Foyles.
Starting on 16 March last year, I began writing daily blogs about the impact of the Covid crisis on financial regulation. Other issues, notably Brexit and digitisation, have featured as well but Covid remains the dominant driver of regulation as we enter 2021.
The Supreme Court judgement on the FCA's BI insurance case is a vindication for both the regulator and the small businesses who took the case. In fact the Court appears to have gone further than most expected and, as Rob Benson, Grant Thornton's head of insurance, points out, their conclusion that the previous Orient Express case, relied upon by the insurance companies, was wrongly decided "removes one of the most significant precedents relating to business interruption".
However, no regulatory event this big is without unintended consequences. The nature of the legal process meant that the FCA stopped being the referee/policeman and took to the field of play on behalf of small businesses. This may well have been the right decision, although it wasn't its original instinct when the problem blew up last April. It will also have long term implications and, for example, it may not be long before the FCA is under pressure to take a test case in other situations. Again, this might be a good thing, but it is quite a shift.
More specifically, it will be interesting to see how closely the FCA gets involved in the claims' process. The situation is quite different, but it is still cautionary to remember that the regulator's PPI redress process that started in 2011 was originally meant to complete in one year but ended up lasting eight. Finally, a further consequence of the judgement may be that the list of specific exclusions in insurance policies becomes longer and harder for the consumer to understand. Were it to happen, the irony wouldn't be lost on anyone.
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