19th January 2021

Back of the net FCA

Firstly, I should make it clear that I, along with a substantial number of others with time served in the financial services industry are often seen to criticise the layers of unfathomable regulation imposed upon regulated firms by the regulator, the latest incarnation being the FCA

But, something happened in the Supreme Court last week that I think the FCA deserves great praise for. 

In fact, it was a great leap forward in the battle to restore public faith in the value of insurance and hopefully of financial advice. The war is still to be won.

Last Friday the UK’s highest court “substantially allowed” an appeal by the FCA to see some 370,000 businesses who effected business interruption cover finally have their claims paid.

Sadly, for some of those firms this judgement will be a little late to save the businesses they fought so hard to start up, grow and thrive.

This action was started by the FCA after the High Court ruled in September, it in effect leapfrogged the Appeal Court and went to the Supreme Court with an appeal against that previous judgement saying that judgment “took something away with one hand after giving more substantially and in detail with the other”. 

Summarising the Supreme Court’s decision on Business Interuption Insurance claims (BII) , Supreme Court judge Lord Hamblen said the High Court’s interpretation of those clauses was “too narrow” noting,  “an instruction given by a public authority may amount to a ‘restriction imposed’ if it carries the imminent threat of legal compulsion or is in mandatory and clear terms and indicates that compliance is required without recourse to legal powers.”

He went on to state that, “Although we have accepted some of the insurers’ arguments on their appeals, in no case has that affected the outcome of the appeal. It follows that the insurers’ appeals are dismissed.”

This will be a lifeline for tens of thousands of hairdressers, bars, restaurants, my golf pro and other small businesses that did what the government legally made them do and closed their doors to protect the health of the nation.

I think the Fat Lady is still to sing. I will not be surprised to see the insurers take action against the government, who created the law to facilitate the legally enforced business closures, while at the same time ignoring the pleas for help from some 470,000 small, sometimes very small business owners and focussing on furlough payouts for those that worked for them thinking that they had Business Interruption Insurance.

The message to consumers from this should be that there is value in taking financial advice insuring unforeseeable risks for example should be top of the list for business insurance, however, I suspect many insurers will no longer offer BII cover or will redraw wordings.

Regulation