However, the watchdog told insurers they must assess and pay claims quickly to firms that do have the correct cover in place.
In a letter to insurance bosses, FCA chief executive Christopher Woolard (pictured) said he wanted to ensure that financial pressures of small firms were not “exacerbated by slow payment” from cover.
Making part payments should be done on claims where it is unclear if a full payout is due.
Woolard added: “If you disagree with doing so, we would like you to send to us the grounds for reaching that decision including how you believe it represents a fair outcome for customers.”
He said policyholders may be disappointed where they do not have the correct cover, but added there was no “reasonable grounds” for the FCA to intervene.
Small business unit
It come as the watchdog has created a new small business unit, which is jointly overseen by Jonathan Davidson, executive director of supervision – retail and authorisation, and Sheldon Mills, interim executive director of strategy and competition.
The purpose is to coordinate FCA activities across small business issues.
At the same time, Woolard wrote to banks and said there must be a senior manager clearly responsible and accountable for lending to small businesses.
He said: “Our objective will be to ensure that there is not a repeat of the well documented historic issues in the treatment of SMEs.”