FCA business interruption test case: A peek into insurers' defences

Arch Insurance (UK) Ltd | June 25, 2020

FCA business interruption test case: A peek into insurers' defences
All of the defendants in the Financial Conduct Authority’s (FCA) High Court business interruption test case have served their defences, and Insurance Business brings you some of the key points from the documents.
“The true position  is  that  a  number  of  separate,  individual actions were  taken and advice given by  different  bodies,  with  different  aims  and  different  effects on different businesses and sectors of the UK economy,” said Arch in its 22-page defence. “It is  only  official governmental  or  local  authority actions or advice  preventing access  to  insured premises  which  are  relevant  to the  government  or  local authority action clause.

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Digital technology destroys value. That might sound counterintuitive given the extent to which it can make business systems more efficient and companies are urged to embrace its many possibilities. Yet new McKinsey research shows that although digital technology propels some companies to become clear market winners, for many more its impact depletes corporate earnings and the overall value of an industry. Consumers, not companies, are often the ultimate winners. So it is likely to be in insurance. For a long time, the traditional insurance business model has proved to be remarkably resilient. But it too is beginning to feel the digital effect. It is changing how products and services are delivered, and increasingly it will change the nature of those products and services and even the business model itself. We firmly believe that opportunities abound for incumbent insurance companies in this new world. But they will not be evenly shared. Those companies that move swiftly and decisively are likely to be those that flourish. Those that do not will find it increasingly challenging to generate attractive returns.

Spotlight

Digital technology destroys value. That might sound counterintuitive given the extent to which it can make business systems more efficient and companies are urged to embrace its many possibilities. Yet new McKinsey research shows that although digital technology propels some companies to become clear market winners, for many more its impact depletes corporate earnings and the overall value of an industry. Consumers, not companies, are often the ultimate winners. So it is likely to be in insurance. For a long time, the traditional insurance business model has proved to be remarkably resilient. But it too is beginning to feel the digital effect. It is changing how products and services are delivered, and increasingly it will change the nature of those products and services and even the business model itself. We firmly believe that opportunities abound for incumbent insurance companies in this new world. But they will not be evenly shared. Those companies that move swiftly and decisively are likely to be those that flourish. Those that do not will find it increasingly challenging to generate attractive returns.

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