Coronavirus – FCA expectations of general insurance firms - UK

• United Kingdom

• Coronavirus - Insurance issues
• Financial services disputes and investigations
• Insurance and reinsurance
• Litigation and dispute management

20-03-2020

The FCA has published information on its expectations of general insurance firms in relation to their treatment of consumers during the coronavirus (Covid-19) pandemic. The FCA has also published information for consumers on what they should expect from their insurance providers during the pandemic.

Christopher Woolard, interim Chief Executive of the FCA, commented that the FCA has “already seen some firms make significant efforts in difficult operating conditions”. The FCA expects firms’ communications with customers to be clear and not misleading, and for firms to be fair and professional in their dealings with customers.

FCA expectations of firms

Many consumers are in a vulnerable position because of the coronavirus pandemic. The FCA expects insurers to consider very carefully the needs of their customers and show flexibility in how they treat them. Customers’ behaviours are likely to change because of the pandemic – for example, customers may need to work from home or commute by car. Firms should recognise this and act accordingly. The FCA does not expect to see customers’ ability to claim on their policies impacted by circumstances over which they have little control.

The FCA expects insurers to clearly communicate any policy exclusions that may impact the cover and use of individual policies. This applies to new sales and changes to existing policies, either mid-term or at renewal. Policies must clearly meet customers’ demands and needs.

Firms should take note of the following points:

• Operational resilience and business continuity: firms should have in place robust systems and controls to continue to operate effectively in a stressed situation, with business continuity plans to manage this, and a Senior Manager responsible for business continuity and managing the impact of coronavirus. Firms should also consider the impact of staff absences on continuity of service to customers.
• Travel insurance: firms must continue to treat customers fairly throughout the product cycle of purchase, claim and renewal. Any policy exclusions resulting from coronavirus must be clearly communicated to existing and potential customers.
• Motor and home insurance: many people will be working from home, and this may conflict with the cover under their current policy. The FCA expects home and motor insurers not to reject claims because of a customer’s temporary change in how they use their vehicle and home address in response to Government advice and the emerging coronavirus situation.
• Private medical insurance: demand for access to hospitals will increase, and private hospitals have been asked to support the NHS. Most privately insured treatment is likely to fall under non-urgent care and may need to be delayed. Insurers should communicate effectively, timely and compassionately with customers.
• Product suspension: firms may decide to suspend some products in order to manage their risk exposure. Where this is the case, the FCA expects firms to consider the needs of their customers carefully, especially where the customer is relying on a renewal for continuity of cover. In such circumstances, if a firm does not renew a policy, it may not be treating customers fairly (even if the product would otherwise be suspended). Insurers should clearly explain the policy coverage and exclusions to customers who are due to renew, consider any exceptional cases of policyholder need, and communicate all changes clearly.
• Product renewals: firms considering making changes to existing policies at renewal must consider the existing requirements for product design and follow the appropriate processes for making changes. The FCA expects firms to consider the needs and particular circumstances of individual customers when considering what may be an appropriate change to make. Where firms change policies to exclude coronavirus, they must make it clear to those customers whose policy is due to renew – prominently, and before renewal – that their policy has changed and what the exclusion is. Exclusions should also be made clear to potential customers.
• Mid-term adjustments: where a firm wishes to make mid-term changes to existing policies, it should consider (i) whether there is a written term in the contract that states they are able to make the change, (ii) whether the terms they intend to rely upon are fair and transparent under the Consumer Rights Act 2015 (or the Unfair Terms in Consumer Contracts Regulations 1999 if appropriate), (iii) whether they are applying the term properly, in accordance with the contract (for example, by complying with any notice period), (iv) whether due regard has been given to the interests of customers and treating customers fairly, as well as the information needs of customers and communicating in a way that is clear, fair and not misleading, and (v) whether they are complying with other relevant legal requirements and FCA rules.

• Brokers: the FCA highlights that brokers have a key role to play in helping consumers to understand the market and the impact of coronavirus. Brokers should keep abreast of market developments so they can suitably advise their customers.

Information for consumers

The FCA has provided information for consumers on how coronavirus could impact their insurance. This covers a range of topics, including the following:

• Travel insurance: guidance is given on holidays booked before 1 March 2020, booking a holiday, holiday cancellation, flight cancellation, decisions not to travel in accordance with FCO advice, essential and non-essential travel, coronavirus exclusions, renewals, and self-isolation.
• Motor and home insurance: consistent with its expectations of firms, the FCA highlights that insurers are expected to take into account any change in a customer’s circumstances due to coronavirus, such as working from home or driving to work.
• Policy renewals: consumers are advised to contact their insurer in good time before their policy is due for renewal as it may that after renewal, their policy will no longer cover claims due to coronavirus.
• Product suspension: the FCA highlights that it is not able to prevent firms removing or amending products for new customers as this is a decision for individual insurers. Consumers are advised to speak directly to an insurer or broker to ensure they buy insurance that meets their demands and needs.

• Monthly premiums: consumers who find they are unable to pay monthly premiums due to financial difficulty should contact their insurer in the first instance.

FCA coronavirus hub

Further information and updates for firms and consumers can be found on the Coronavirus (Covid-19) section of the FCA website.

Useful links

Insurance and coronavirus: FCA press release

Insurance and coronavirus: FCA expectations of firms

Insurance and coronavirus: information for consumers

FCA coronavirus (Covid-19) hub