The Insurance Series: Why industry changes should not stop you taking out a policy

June 2021

The Insurance Series: Why industry changes should not stop you taking out a policy

If your business has suffered due to Covid-19 and your insurer has refused to pay out, a recent landmark decision may change that. The Supreme Court ruled on a case brought forward by the Financial Conduct Authority on behalf of its policyholders who were adversely affected and found in its favour. We look at what happened, what it means and why you should always take out insurance. If you would like to discuss insurance options in more detail, please contact us on

The background to the case

When lockdowns and restrictions came into force in 2020, many businesses had to close. Others suffered significant impacts due to restricted operations or a drop in business. As a result, companies made substantial losses and incurred costs which they sought to recover from their insurers. Claims against business interruption policies under ‘disease’ or the ‘prevention of access’ clauses were submitted.

Some insurers accepted those and paid out on the policies. However, others refused to, disputing that they had any liability under the policies or that these clauses were applicable. This led to further disagreement over the clarity of insurance policies and the certainty of coverage in the event of a claim.

The Financial Conduct Authority’s involvement

The Financial Conduct Authority (FCA) took up the case on behalf of its members, applying for urgent clarification on what insurers should cover. Overall, they used a representative sample of 21 types of policy issued by 8 insurers. The FCA argued that the ‘disease’ and ‘prevention of access’ clauses applied to Covid-19. They also argued that the need to claim for business interruption was triggered by the government-imposed restrictions and the public’s response to the pandemic.

Initially, the case went to the High Court which was able to resolve many of these issues. However, consensus could not be reached on all and so the FCA appealed directly to the Supreme Court.  

The Supreme Court’s decision

In essence, the Supreme Court upheld the FCA’s appeal. It ruled that cover under the ‘disease’ clause applies. It also determined that legally binding closure orders are not necessary. In other words, the government-imposed restrictions were not a requirement for businesses to be able to submit a claim. A business may suffer on the basis of a full or partial closure, and both should be covered under ‘prevention of access’ clauses.

What it means for policyholders

For policyholders, this is good news. Those whose claims were initially rejected are now more likely to have valid claims and can expect those to be settled by their insurer. The Supreme Court also went further than the High Court in how wide-ranging coverage should be. This means that even more policyholders will have valid claims and that pay-outs are likely to be higher in certain cases.

If you have not yet heard from your insurer, you should soon. It may be worth following up to confirm that they are (re-)considering your claim following the Supreme Court judgment. If your insurer is not complying with the ruling, you can refer your claim to the Financial Ombudsman Service who can look into it further.  

Why taking out insurance can be critical

It is easy to be put off taking out insurance cover or thinking that it is not necessary. It may be an added cost to your business, but in the context of potential losses it is minimal. Stories of insurers refusing to pay out are numerous, but perseverance can pay off. There are powerful organisations in your corner. The FCA has demonstrated how it can fight and win on behalf of its members, and in turn benefit even more policyholders.

No matter what your business is, insurance cover is essential. Having financial cover for unforeseen circumstances could be the difference between staying operational or having to close permanently. The events of the past year show us just how pertinent this is. The insurance industry is constantly changing, and cases such as this will pop up from time to time, forcing further adjustments and modifications. This should not put you off taking out a policy. In fact, it should reassure you that there are benefits to it that it is in your favour.

We are in your corner too

Our Plutus Wealth team of independent financial advisers is on your side. We can advise on the right type of insurance to protect you, your loved ones and your business and find the best cover for your circumstances. If you have any concerns or questions, or would like to discuss insurance further, please get in touch. You can write to us at or call us on 020 7871 5200.


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