Covid supports not a subsidy for insurance firms – McGrath
Minister for Public Expenditure and Reform Michael McGrath has said the Covid-19 supports paid to businesses were “never intended to be a subsidy for insurance companies”.
The Minister said the Government is “examining” the issue of insurance companies seeking to deduct such payments from payouts owed to businesses.
“The supports that the State has provided to businesses were never intended to be a buffer for the profits of insurance companies,” Mr McGrath said on his way into a Cabinet meeting at Dublin Castle today.
“Those supports are there to assist businesses to pay wages, to give them every fighting chance of coming through the pandemic,” the minister said.
“They were never intended to be a subsidy for insurance companies. So the Government is examining that issue actively,” he added.
Earlier this year, the High Court ruled that insurer FBD should pay out claims under business interruption policies to four pubs who took a test case against the insurer.
The judgement had implications for more than one thousand other pubs and restaurants with similar claims.
However, the Sunday Business Post recently reported that FBD and other insurers were seeking to deduct Covid related supports received by customers from the state from their claim payouts.
In a statement, FBD said today that while clarity has been received from the High Court in relation to liability, a further hearing is required to provide clarity in relation to the calculation of quantum.
“FBD awaits this final determination by the courts in order to fully settle claims and we continue to work with all stakeholders to progress this as efficiently as possible,” it said.
“In advance of the Court’s final determination on quantum, FBD is providing interim payments to policyholders. All parties are awaiting the further Court hearing on quantum and we hope to have an update on this in the coming days.”
Industry body, Insurance Ireland, seemed to support FBD and its other members taking this approach.
“While claims handling is a matter for individual insurers, this approach is consistent with the insurance principle of ‘indemnity ‘, which means insurance is intended to cover the loss experienced by the insured and the purpose of the cover is to put the insured back into the same position as if the loss had not occurred,” it said.
“In any insurance claim, payment is calculated net of savings made from other sources such as utilities.”
“This means under the principle of “indemnity”, if an insured was able to avail of these savings, then it would be understandable that an insurer would include them in their settlement calculations.”
The Minister of State at the Department of Finance Seán Fleming said he raised the issue of business interruption claims being paid to policy holders with the Central Bank yesterday.
Speaking on RTÉ Radio One’s Morning Ireland, he said there is a precedent in other insurance claims where the insurance company repays the State any welfare payments made to a person as a result of disability or similar payments.
Mr Fleming said that insurance companies “cannot be let off the hook and reduce their payments”.
He said the full amount must be paid and the insurance companies must refund the State subsidies paid.
Minister Fleming said the Government would aim to re-invest this money in the sectors affected by the pandemic closures.