On 19 March 2020, the Financial Conduct Authority (FCA) published a statement on what it expects insurers and brokers to do during the pandemic.
Firms should consider the needs of their customers and show flexibility in how they are being treated during this time, particularly as policyholders will have to change their behaviour during the pandemic. Policy-exclusions should be communicated clearly where they will have an impact on cover. Clear information must be given regardless of whether the firm is dealing with a new sale or an existing policy (including mid-term adjustments or at renewal).
The following are specifically mentioned by the FCA:
Operational resilience and business continuity
Firms must have plans in place to mitigate the operational impact of the virus. The FCA expects firms to have robust systems and controls to continue to operate effectively during this stressed period. A Senior Manager should be given responsibility for business continuity and managing the impact of coronavirus. Firms are reminded of their obligations under the Principles for Businesses.
The FCA expects travel insurance providers to treat their customers fairly throughout the product cycle. Exclusions relating to Covid-19 must be clearly communicated to existing customers who might have had travel booked before they were aware of the outbreak. Where customers have bought annual policies that cover cancellation risks and a claim arises after renewal, the FCA expects firms to treat these customers fairly – especially where the policyholder was given a reasonable expectation that cover would continue. The FCA says that firms should, where appropriate “renew or consider claims under the terms of the original policy”.
Motor and home insurance
The FCA expects firms not to reject claims because of temporary changes to a consumer’s circumstances during the pandemic, including their home address or use of vehicle.
Private medical insurance
Where private hospitals are under pressure to support the NHS it is likely that privately insured medical treatment will fall under non-urgent care and may need to be delayed. Insurers must ensure that they communicate with compassion during this time.
Although the FCA recognises that firms are managing their risk exposure during this period, it expects firms to consider the needs of customers carefully, in particular where customers are relying upon renewal. Alternative products that do not meet customers’ needs should not be sold.
Firms changing policies at renewal must still take into account their obligations in respect of product design and product governance.
Many firms are considering making mid-term adjustments to existing policies. In these circumstances, the FCA expects firms to consider: whether the contractual terms allow such changes, whether the changes are fair and transparent under the Consumer Rights Act 2015, whether terms are applied properly, whether due regard has been given to the interests of customers and whether the change is in compliance with law and regulation. Product governance and rules regarding clear communication continue to apply, regardless of the current crisis. Firms will be expected to demonstrate that they are balancing the needs of their customers with the interests of the business during this difficult period.