The trade has condemned insurance companies which deduct furlough payments from successful business interruption insurance claims.
Abta said insurance companies were now “routinely deducting furlough payments” from claim pay-outs despite calls by the Financial Conduct Authority (FCA) for insurers to treat businesses fairly on a case-by-case basis following the Supreme Court’s ruling in favour of small firms.
It called the approach of insurers “unjustified” while one tour operator affected called the decision to deduct furlough payments a “rip-off” and “immoral”.
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The Supreme Court’s ruling in January means insurers must pay out on business interruption insurance policies. Already more than 50 travel agents are in the process of having their claims reassessed in the hope they can make individual or small group claims on a ‘no win, no fee’ basis.
Tour operator Wildfoot Travel, which has been told it has a successful claim, has already been warned furlough payments will be deducted from its final pay-out.
Managing director Simon Rowland said his claim was for a ‘substantial’ amount, with more than 25% likely to be deducted from the total amount based on his company’s furlough payments.
Rowland has already contacted MPs John Glen and Esther McVey as well as the FCA for help on the issue, which he said highlighted a loophole not addressed in the Supreme Court ruling.
He said: “I want to know what right they [insurers] have to do this. Is it morally right? Why wasn’t it addressed in the Supreme Court?
“The insurers have told us that if we have staff on furlough they will claim that back; they see furlough payments as a benefit to the business. The benefit for the company has been the fact we have been able to keep the valued staff.
“I feel this apparent loophole is immoral and making money from essential support payments which are designed by the government to help small and medium sized companies during the pandemic, not corporate insurance companies and shareholders.”
Abta said it was aware members were concerned. A spokesman said: “Abta has been contacted by a number of members about the assessment of their business interruption insurance losses and claims payments for which insurers have applied an unjustified approach to deducting furlough payments from their bill claim value.
“We believe our members’ insurers are routinely deducting furlough payments and thus not following FCA’s expectations around the fair treatment of policyholders.
“Clearly, insurers have failed to consider the appropriateness of deductions of furlough payments when calculating the business interruption insurance claims payments of our members as a sector or on a case by case basis.”
Bharat Gadhoke, head of commercial for the Specialist Travel Association (Aito), added: “I am not overly surprised that insurers are deducting furlough payments. The behaviour of insurers during the pandemic has been abhorrent and I would not put anything past them.”
The FCA told insurance firms in January it expected them to treat policyholders fairly and consider the appropriateness of deductions of any government support, including furlough payments, on a case by case basis at board level.
In a statement, the FCA said: “We have been clear with firms they should take into account various matters when considering whether a particular form of government support should be deducted from the non-damage business interruption claim. We expect firms to reflect these matters, appropriately in their communications with policyholders when making settlement offers and reaching settlements.”
The FCA said it “may intervene and take further actions” where firms do not appear to be treating firms fairly, adding: “We also confirmed our expectation that firms explicitly consider the treatment of the various forms of government support at board level and appropriately document their consideration and conclusions. We told insurers we would follow up with them individually as appropriate.”