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UK insurers explain how grants impact BI claims

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The Association of British Insurers (ABI) has rejected accusations that the industry is trying to use the UK Government’s pandemic financial grants as a subsidy to avoid paying business interruption (BI) claims.

Responding to enquiries from small business owners, ABI Director General Huw Evans says insurers are required by law to only pay for actual income loss suffered if a BI claim is accepted.

Very few UK businesses have BI policies that cover for pandemics. He says that in these cases, the final claim paid will have to take into account government grants that may have been given to claimants.

“If insurers were to make payments beyond those set out in the insurance policy, to cover income firms had not ended up losing, they would be unable to recover such payments from their own reinsurance,” Mr Evans said.

“They would also risk being non-compliant with regulatory requirements that demand insurance executives hold the right amount of capital for the claims they have contractually committed to pay and that they manage the firms’ finances prudently and responsibly.

“I therefore do not share the characterisation that insurers are treating the grant scheme as a subsidy to protect against losses.

“They are simply recognising when income has already been replaced and avoiding double-compensating the claimant.”