NCR Karen Chester, Deputy Chair
Published on April 23rd 2021 in

ICA defends BI claims process

The Insurance Council of Australia (ICA) has released a detailed explanation of the industry’s response to COVID-19 related business interruption claims, following criticism of lengthy test cases which compare unfavourably with a similar process in the UK.

The first test case, which dealt with the issue of exclusions referring to the now repealed Quarantine Act, went against insurers but arguments are yet to be heard on a High Court appeal. A second test case will deal with issues such as the definition of disease, proximity of an outbreak to a business, and prevention of access due to government mandates, and is heading for a Federal Court trial later this year.

Some believe it could be the end of next year before all hearings and related appeals are completed, but ICA has a more optimistic view, hoping for clarity before the end of this year. ASIC has also criticised the process: “We have been frustrated with the time that it has taken for the first test case, which perhaps was not as broad as it could have been, such that we find ourselves in a world of a second test case,” said Karen Chester, ASIC Deputy Chair.

ICA, however, released a detailed statement highlighting several key points, including:

  • Pandemics were not considered for coverage under most business interruption policies and premiums were not collected.
  • All parties recognised additional test cases would likely be required but at that early stage an insufficient range of complaints had been submitted to AFCA.
  • The UK Financial Conduct Authority (FCA) has the power to bring hypothetical claims to the court process, but ASIC does not. Instead test cases must be based on actual complaints lodged with AFCA.
  • The industry wants to bring clarity to claimants as soon as possible and stands ready to act swiftly on court rulings.

“As soon as the courts make their final determinations the general insurers impacted have plans and resourcing in place to move quickly on processing whatever claims then become eligible for payment,” an ICA spokesman said. “As an industry we are also considering possible options that would assist in the fast resolution of BI claims, for example a centralised database identifying where outbreaks of COVID-19 have occurred.”

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