As everyone from challenger banks to regulators are dealing with the global COVID-19 outbreak, the UK’s financial watchdog has given insurance companies a clear indication how they should conduct themselves during the crisis.
The Financial Conduct Authority’s (FCA) expectations for general insurance firms came with a reminder that many consumers have been forced into a vulnerable position because of the coronavirus pandemic.
Given the “unprecedented impact of coronavirus“, the FCA urged insurers to “show flexibility in their treatment of” customers.
“We are likely to see customers’ behaviours change because of the pandemic,” the FCA said in a statement. “For example, this could mean that customers may need to work from home or commute by car. We would not expect to see their ability to claim impacted by circumstances over which they have little control.”
The regulator said it expected firms be clear in its communication if there are any policy exclusions that may impact the cover and use of individual policies. This, the FCA said, should be applied to both new sales or changes to existing policies.
The FCA also said that it expected insurers to be operationally resilient and have plans in place to manage and mitigate the operational impact of coronavirus.
This level of preparedness should include having sufficiently robust systems and controls to continue to operate effectively in a stressed situation with business continuity plans to manage this and having a senior manager responsible for business continuity and for managing the impact of coronavirus.
The FCA continued that insurers should consider how having staff working from home or being absent entirely would affect their business and employees’ wellbeing.
Looking particularly at travel insurance, the FCA stated that in some cases consumers would have bought annual travel insurance would expect their policies to cover the risk of cancellation or curtailment and are relying on a policy renewal to cover travel arrangements made before the coronavirus situation escalated.
“In these circumstances, the terms of the current policy may allow for a pay-out when the event causing the cancellation or curtailment occurs,” the FCA said.
“If the claim arises after the renewal date, we would expect insurers to treat customers fairly, taking individual circumstances into account. This includes where the policyholder was given a reasonable expectation that cover would continue. Where appropriate, renew or consider claims under the terms of the original policy for these travel arrangements.”
In terms of motor and home insurance, the FCA said that people self-quarantining may mean that some people may be working from home. As such, that might mean that they are bringing devices and other work-related assets home. The result of this could be that they worry about it conflicting with the cover under their current policy.
“We expect motor and home insurers not to reject claims because of a consumer’s understandable temporary change in how they use their vehicle and their home address, in response to government advice and the emerging coronavirus situation,” the FCA said.
Looking at private medical insurance, the FCA noted that the coronavirus is likely to cause an increasing demand for access to hospitals.
While private hospitals have been asked to support the NHS during the crisis, the exact nature of the support is currently unknown. However, this could have an impact on consumers who have private medical insurance and are currently or are due to receive treatment.
The regulator stated that since most privately insured treatments are likely to fall under non-urgent care, these may need to be delayed due to the coronavirus. If that happens, insurers are expected to communicate effectively, timely and compassionately with customers.
Some insurers may be tempted to suspend their product offering to minimise risk, but the FCA stated firms must consider the needs of their customers carefully when that happens. If a customer was to want to renew their policy in order to keep being covered, the FCA warned that “it may not be treating customers fairly if a firm were to not renew” even if the product would otherwise be suspended.
Any changes in terms of renewals should, again, be the policy coverage and exclusions clearly explained to them in all circumstances.
The FCA also banned selling any alternative products to consumers that do not meet their demands, needs and where the product is not their best interest.
“If firms are changing their policies to exclude coronavirus, we expect them to make it very clear, in a prominent position, to those consumers whose policy is due to renew, that their policy has changed, and of the exclusion – both before renewal,” the FCA stated.
Christopher Woolard, interim chief executive of the FCA, added, “We have already seen some firms make significant efforts in difficult operating conditions. We expect all firms to be clear and not misleading whenever they communicate and be fair and professional in how they deal with their customers.
“Customer behaviour is changing. We expect insurance firms to recognise this and treat their customers fairly, recognising the circumstances customers may find themselves in. We would not expect to see a customer’s ability to claim affected by circumstances over which they have little control.
“Any customer concerned about their insurance should consider contacting their provider with any questions they may have.”
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