Out-Law Analysis | 24 Mar 2020 | 10:37 am | 3 min. read
The regulator's expectations for general insurance firms during the ongoing coronavirus, or Covid-19, pandemic, focus particularly on travel, motor and home, and private medical insurance.
The FCA acknowledges that general insurers will be trying to manage their exposure to risks by taking measures such as introducing policy exclusions on renewal or suspending products. However, it is clear that the FCA expects firms to treat customers fairly, act in the customer's best interests and be clear, fair and not misleading in their communications.
According to the FCA, insurers must consider the needs of customers carefully, in particular where the customer is relying on renewal for continuity of cover, and take into account any vulnerabilities. It said that, in such circumstances insurers might not be treating customers fairly if they chose not to renew cover even if the product would be suspended for other reasons. These expectations tie in with the FCA's ongoing consultations on vulnerable customers and its work on treating customers fairly in the context of the impact of distribution chains on product value and on pricing in the general insurance sector.
With both insurers and brokers in mind, the FCA has emphasised that alternative products should meet the demands and needs of customers. Communications about policy exclusions on renewal should make it very clear, in a prominent position and before renewal, that the policy is due to renew and that there will be an exclusion, it said.
Regarding travel insurance, insurers should take individual circumstances into account, where a claim relates to travel arrangements made before the coronavirus situation escalated and arises after the renewal date, particularly where the consumer was given a reasonable expectation that cover would continue, the FCA said. Where appropriate, the insurer should renew or consider claims under the terms of the original policy for these travel arrangements. The FCA has advised consumers whose holiday has been cancelled to contact their travel insurance provider, where the holiday is covered by ABTA or ATOL protection but the provider is unable to offer a refund or an alternative. Travel insurers should be prepared for such claims.
In a separate statement issued for consumers, the FCA urged consumers to contact their insurer before travelling, in case of holiday and flight cancellations, if having to self-isolate whilst travelling, before renewal, and in case of financial difficulty where they are using premium finance to fund their policy. Insurers will need to handle a large volume of communications and maintain their compliance with the FCA's conduct rules.
Motor and home insurers should be mindful of consumers following government advice and changing how they use their vehicle and their home address and should not reject claims because of such understandable temporary changes.
Medical insurers should communicate effectively, timely and compassionately on delays to non-urgent private medical treatments provided under an insurance policy, where the private hospital providing the treatment is required to support the NHS.
In addition, the FCA's expectation is that general insurers will consider existing requirements for product design when making changes to policies on renewal, suspending products and offering alternative products. This follows on from the FCA's recent letter to the general insurance industry in which it raised the effective implementation of regulatory changes, such as the product governance rules introduced by the Insurance Distribution Directive (IDD), as fundamental to tackling significant risks of harm.
The FCA also warned general insurers that they should have plans in place to manage and mitigate the operational impact of Covid-19. Firms should consider the impact that staff absence and the need to ensure staff wellbeing will have on continuity of service. Firms should mitigate the effect of staff absence or inability to use business premises. These expectations are in line with the FCA's proposals on operational resilience. Where firms identify gaps that will, or could, cause harm to consumers, they should notify the FCA.
The FCA also expects general insurers to have a senior manager "responsible for business continuity and for managing the impact of coronavirus". Dual-regulated insurers have been subject to the senior managers and certification regime since 10 December 2018 – and the rest of the industry since 10 December 2019. These rules are designed to increase individual accountability within the financial sector.
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