The regulator will instigate a number of test cases to clarify the scope of cover and said the move was to resolve doubt for businesses facing “uncertainty” on their claims.
It is also looking at introducing measures to support consumers and businesses who hold insurance products and who are facing other issues as a result of Coronavirus, such as difficulty in meeting premiums.
The measures will set out the FCA’s expectations that insurance firms should consider whether their products still offer value to customers during the Coronavirus outbreak and whether they can do more for those suffering a financial impact because of coronavirus.
There have been growing concerns that firms are facing an uphill struggle trying to claim for Coronavirus on business interruption insurance.
Earlier this week the ABI estimated the total cost of the Coronavirus outbreak to British insurers is set to total £1.2bn with £900m due to business interruption claims. However it said most businesses were not covered for losses related to the pandemic.
Christopher Woolard, FCA interim chief executive, said any legitimate claims for business interruption during the virus should be settled without delay.
He said: “We have been clear that we believe in the majority of cases, business interruption insurance was not purchased to, and is unlikely to, cover the current emergency.
“However, there remain a number of policies where it is clear that the firm has an obligation to pay out on a policy. For these policies, it is important that claims are assessed and settled quickly.”
He said the FCA’s court action was intended to provide greater clarity for the insured and insurers.
He said the current crisis had also altered the value of some insurance products and insurers should review whether their products still offer value.
The watchdog will bring to court key relevant cases to provide clarity on specific policy clauses as soon as possible, it said, to get an independent view on disputed BI insurance policies.
The FCA is writing to a small number of firms seeking clarification about whether they are declining, or intend to decline BI claims. The FCA expects these firms to reply by 15 May. Based on the information obtained, the FCA will consider which firms to ask to join the court process.
The FCA is also looking at whether premium holidays and other measures to help policyholders should be more readily offered.
The FCA will seek comments on its proposal to help customers in temporary financial distress by 5 May. If confirmed, the measures to help customers in temporary financial distress will apply shortly after 5 May for three months.
ABI director general Huw Evans called the court action move “a welcome step” and said insurers will look to work closely with the regulator to make the process a success.
He said the “vast majority” of business interruption policies do not cover pandemics and the Government has confirmed it will not seek to retrospectively amend contracts, however for the “minority” of customers who are disputing whether they should be covered greater clarity would be helpful.