Insurance sector’s hard-nosed approach sees surge in High Court battles
A hard-nosed approach towards paying out on policies, particularly in relation to Covid-19 business interruption claims, has led to a surge in lawsuits being filed against the UK’s insurers, new research shows.
The number of High Court lawsuits filed against insurance companies more than tripled between 2017 and 2021, as policyholders increasingly resorted to legal action in their disputes within insurers, analysis from Mactavish shows.
The surge in lawsuits comes as insurers have become increasingly reluctant to pay out on claims, as they seek to shore up their balance sheets in the face of tougher market conditions, Mactavish chief executive Bruce Hepburn said.
The surge has seen the number of High Court lawsuits increase almost 280 per cent from average rates of 19 each year in 2017 to heights of 72 in 2021.
“Insurers don’t just react to a hard market by hiking rates, they also clamp down on claims,” Hepburn said. “In today’s prolonged hard market, insurers don’t care about market share, they care about protecting their balance sheets.”
The Covid-19 pandemic also led to a significant uptick in court disputes, as shuttered businesses sought payouts on business interruption (BI) policies.
The spike in claims came after the UK’s Supreme Court ruled in January that businesses are entitled to compensation for Covid-19 closures under BI insurance policies.
The research notes that those disputes that reach the High Courts are just the tip of the iceberg, as the bulk of conflicts are resolved beforehand, using private settlements via mediation and arbitration.
Mactavish’s analysis raises concerns that insurers are increasingly taking a “kitchen sink” approach to hinder any claim, by offering multiple reasons not to pay out, as it noted many of the reasons initially put forward by insurers fell away before cases reached court.