The Central Bank has told insurance companies that where there is ambiguity in the interpretation of the contracts of customers who are making claims arising out of the Covid-19 disruption, they must find in favour of the consumer.

In a letter to insurers, seen by RTE News, the bank has also told the firms that it expects that where there is a valid claim, they must pay out promptly.

The direction relates to all insurance products, not just business interruption cover.

It's understood that in most relevant insurance contract clauses the wording is considered clear.

As a result, there is unlikely to be a large number of cases where consumers will have claims paid simply because of ambiguous terminology.

The bank will also not be accepting the argument being put forward by some insurers that business interruption cover does not apply because strictly speaking the Government did not formally direct that they should close.

It is understood that the bank has taken a view that the Government had put out a public health request, which amounted to the same thing as a direction to close.

The CEOs of the authorised insurance companies must also individually sign-off on any oversight of how Covid-19 claims are handled.

The views have been sent to insurers this afternoon in a letter from the regulator.

A spokesperson for the Central Bank declined to comment on the matter.

Some businesses, especially in the hospitality sector, had complained that their claims under business interruption policies were not being honoured by some insurers because according to them the circumstances surrounding the Covid-19 pandemic did not meet the requirements for a pay-out.

Certain insurers had argued that because their business customers had not been directed to close, or the communicable disease, in this case Covid-19, had not originated on their premises, they were not covered.

Earlier this week, Peter Boland, director of the Alliance for Insurance Reform, said that it had been inundated with calls from small businesses that have had to close, thought they were covered by their business interruption insurance and are now being told by their insurer that they are not.

In the letter sent today, the bank reminds regulated firms that they have an obligation to act honestly, fairly and professionally in the best interest of consumers and to comply with the Central Bank's Consumer Protection Code and other regulatory requirements.

It also says that it "expects that the insurance industry will play its part in protecting its customers during this extraordinary time, to be sensitive to the difficult situation in which many find themselves, and to take steps to support them."

The regulator also says that all firms need to be sensitive to changes in customers' circumstances due to the public health measures taken to counter the spread of COVID-19, which have left many in a financially vulnerable situation. 

"We expect you to provide reasonable arrangements to support such customers in their dealings with your firm at this difficult time," it states.

It has also told the insurers that operationally they must ensure customer-facing functions are adequately resourced and supported.

It is understood that officials from the Central Bank will hold a virtual meeting with Insurance Ireland and representatives of individual insurers on Monday to discuss the matter further.

Meanwhile, AXA Insurance has said it will pay out legitimate claims from up to 4,000 firms here with business interruption cover if their companies have been adversely impacted by Covid-19.

The company has written to the 4,000 holders of the policies, which typically cover shops and offices, telling them it has deemed the coronavirus does meet the description of a disease as set out in their policies.

However, Axa Director Antoinette McDonald said it also has more customers whose policies only cover specifically named diseases that do not include Covid-19 and as a result the policyholders will not be covered.

The number of customers in this category is understood to be in the region of 10,000.

These businesses and their brokers have also been informed of the decision.

Ms McDonald also warned that even for those policies which cover Covid-19 currently, AXA has been told by its reinsurers that Covid-19 will not be included at the next renewal of the policy.

"We are being very clear with our customers and brokers that while we are very happy to be able to honour these claims at this time, we will not be able to continue to offer Covid-19 cover when the policies are renewed because we are unable to get the risk reinsured ourselves," she said.
 
AXA says it has also taken additional steps to support brokers and direct customers in the current crisis, it said.