Many consumers are currently in a vulnerable position because of the coronavirus (Covid-19) pandemic. We expect insurers, given the unprecedented impact of coronavirus, to be aware of the circumstances that customers find themselves in. This web page is aimed at helping firms understand the FCA’s position. Read about our expectations of insurance firms.
We expect firms to consider very carefully the needs of their customers and show flexibility in their treatment of them. We are likely to see customers’ behaviours change because of the pandemic. 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.
We expect firms to clearly communicate any policy exclusions that may impact the cover and use of individual policies. This applies both to new sales or changes to existing policies (either mid-term or at renewal) – they must clearly meet consumers’ demands and needs.
Operational resilience and business continuity
It is essential that all general insurance firms have plans in place to manage and mitigate the operational impact of coronavirus. More generally, we expect firms to:
- Have sufficiently robust systems and controls to continue to operate effectively in a stressed situation with business continuity plans to manage this.
- Act fairly, honestly and professionally in accordance with the best interests of customers.
- Ensure that all customer communications are clear, fair and not misleading.
Firms should consider, along with other challenges, the impact of staff absences and the need to ensure staff wellbeing on continuity of service. Firms must identify how staff absence or inability to use business premises can be sufficiently mitigated to ensure critical services are provided to customers. Where firms identify gaps through their planning that will, or could, cause harm to customers, they should notify the FCA through their usual supervisory contact.
The pandemic has had a significant impact on the way we all travel. The risks associated with travelling have changed and the insurance against those risks has also changed. This means that, when buying travel insurance, customers cannot rely on their pre-pandemic knowledge and experience. We expect firms to take account of the changes to the travel landscape, in their marketing, sale, design and monitoring of travel insurance products.
We expect firms to consider their regulatory requirements in light of the changed travel market. This includes requirements relating to communication (including marketing), sale standards, demands and needs, product governance and relevant coronavirus guidance we have issued. Our expectation is that firms must ensure they continue to treat customers fairly during the whole product cycle.
Firms must ensure that their communications with customers are clear, fair and not misleading. In particular, firms should not use terminology that customer’s might not understand. We have seen firms advertising and selling products which have ‘coronavirus cover’ or ‘enhanced Covid-19 cover’. These terms do not have a commonly understood meaning and can reflect very different types of cover depending on the firm.
We expect that customers and prospective customers should be provided with clear information and have a clear understanding of the extent that travel products will protect them against coronavirus-related risks. Firms selling travel insurance must ensure that customers are given appropriate information about a policy so that they can make an informed decision. This will include providing clear information about the policy including the main benefits, limitations, conditions and exclusions including those relating to coronavirus, regardless of the ‘sophistication’ of the customer and whether the customer has previously bought a travel policy from the firm. Where exclusions are in place, they should be sufficiently clear so that customers understand the impact and situations in which the policy will not pay out.
Demands and needs
When selling an insurance policy, firms must only offer customers travel insurance that meets their demands and needs.
Firms manufacturing new insurance products or making significant adaptations to existing products, are required to apply a product approval process under our product governance rules before marketing or distributing that product. Where firms are making changes to an existing product, including adding any material exclusions from cover, they must consider whether these changes are significant enough to trigger the product approval process. A change to an existing product to exclude the insurer’s liability for risks relating to coronavirus, in whole or in part, is likely to amount to a significant adaptation of the insurance product.
In addition, our coronavirus guidance on product value set expectations for firms to consider the value of their products in the light of the pandemic. Product manufacturers should now have reviewed their products to identify if coronavirus affected the intended value of these products.
As part of ongoing product monitoring, we expect firms to consider available information – such as the number of, and reason for, claims being declined – which could indicate that the product has distributed outside of the identified target market or that the customer experience does not match what the firm had anticipated.
Motor and home insurance
Many people will also be changing the locations from which they carry out certain activities and keep certain items. For example, many consumers may use their home to as their main work location during the current situation and keep some work-related assets at their home address. Consumers may be concerned that this conflicts 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.
Access to premises
Following Government restrictions on travel and the ongoing coronavirus situation, some consumers may not be able to access their main or additional residential properties, while businesses may not be able to access commercial premises. Where access is required as part of the terms of a policy, we expect insurers to take account of a customer’s temporary change in how they access those premises, and treat their customers fairly. We don’t expect insurers to void policies or reduce potential claims as a result. Contact your insurer if you are concerned about being unable to access your property.
Updated guidance on MOTs
The Department for Transport has updated its website, stating that MOT expiry dates for cars, vans or motorcycles will be extended by 6 months if the MOT was due between 30 March 2020 and 31 July 2020. An MOT certificate will not be extended if a vehicle’s MOT expires on or after 1 August 2020. An MOT must be booked as usual.
Given this additional guidance, we expect motor insurers to continue to provide cover for consumers’ car, motorcycle or van insurance due to their temporary situation, in line with Government policy of not being able to receive (and not needing) a new MOT certificate. This includes at renewal, to ensure customers are able to shop around for their insurance.
Private medical insurance
Demand for access to hospitals is likely to increase. We are aware that private hospitals have been asked to support the NHS. The exact nature of the support is currently unknown, but it is likely to have an impact on consumers who have private medical insurance and are currently, or due, to receive treatment.
Most privately insured treatment is likely to fall under non-urgent care and may need to be delayed due to coronavirus. Insurers need to communicate effectively, timely and compassionately with customers.
During winter and spring, the UK frequently suffers significant weather events, when storms and flooding can cause property damage to homes and businesses. Parts of the UK saw severe flooding in December 2020.
The ongoing coronavirus situation may present operational challenges to insurance firms when managing claims involving floods and storms.
We remind insurers that it is essential they have plans in place to manage the operational impact of coronavirus. This includes having sufficiently robust plans to continue to operate effectively when there is pressure on services. See Operational resilience and business continuity.
In our work with insurers over the past few months, we have seen different steps they have taken to prepare for the impact of coronavirus on the seasonal increase in flood and storm-related claims. These include:
- Reviewing and adjusting their operational contingency plans to address the additional operational challenges they have identified from the coronavirus pandemic.
- Conducting reviews of capacity and resources of the supply chain, and of third parties who handle claims for the insurer.
- Assessing the impact of coronavirus on the claims process and adjusting it as necessary. This includes factors such as the impact of lockdowns and other coronavirus-related restrictions on service providers’ ability to access and carry out work in affected areas, and the availability of alternative accommodation where needed.
Customers affected by damage caused by storms or flood water may require immediate assistance. This means it is critical that they can contact their insurer quickly and speak to staff who are able to deal with their claim. We have seen some insurers addressing this challenge, particularly where the pandemic may lead to staff absences, by cross-training staff so that they can be deployed quickly and flexibly to respond to affected customers as claim volumes increase.
Firms should ensure that they are able to respond to customers appropriately, including customers they have identified, or who identify themselves, as vulnerable. In doing so, firms should also recognise that some customers may be facing financial difficulty because of the pandemic. This may affect their ability to pay for any immediate costs, such as paying for alternative accommodation or replacement items, while their insurance claim is being processed.
We remind insurers to consider if emergency and interim payments are appropriate in light of the customer’s circumstances, and to ensure they make payments in a timely way.
As with all claims, and regardless of the challenges from the pandemic, we expect firms to handle storm and flood claims promptly and fairly, ensuring that customers do not face barriers or delays when making a claim. Firms should provide customers with clear communications about the information they need to support their claim. Firms should also keep customers informed on progress, including timeframes for any work to be carried out and settlement payments made.
Insurers hold regulatory responsibility for the claims process and outcomes, including when they delegate the handling of claims to a third party. They must maintain appropriate oversight of these arrangements to ensure that their outsourcing relationships are meeting the insurer’s regulatory obligations.
We understand that firms may decide to, or want to, suspend some product offerings. While we appreciate that firms are trying to manage their exposure to risks, we want to make clear our expectations of how firms deliver this change.
In these instances, the FCA’s expectations of firms are:
- Firms must consider the needs of their customers carefully, in particular where the customer is relying on a renewal for continuity of cover (taking into account any vulnerabilities). In such circumstances, it may not be treating customers fairly if a firm were to not renew (even though the product would otherwise be suspended).
- Consumers who are due to renew their policy should have the policy coverage and exclusions clearly explained to them in all circumstances. Any exceptional cases of policyholder need should be considered by the insurer and all changes need to be clearly communicated.
- Alternative products are not sold to consumers that do not meet their demands and needs, and not in their best interest.
Firms considering making changes to their existing policies at renewal need to consider the existing requirements for product design. Firms making changes to policies must follow the appropriate processes for making these changes.
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.
We expect firms to consider the needs and particular circumstances of individual consumers (taking into account any vulnerabilities) when considering what may be an appropriate change to make. Firms must be able to demonstrate that they are complying with our rules and treating their customers fairly.
We also expect firms to make it clear in other relevant communications about exclusions to potential consumers, to ensure their messaging is fair, clear and not mis-leading.
Firms may experience challenges in contacting consumers, for example if they are unwell. This may make it harder to meet key conduct requirements such as assessing consumers’ demands and needs at renewal.
If this is the case, we expect firms to continue to seek to meet these requirements, including the obligation to act honestly, fairly and professionally in accordance with the best interests of the customer. We have not prescribed how firms should go about meeting these requirements.
It may be reasonable for firms to rely on existing information that they already hold, for example if this information is recent, is still expected to be accurate, and there have not been significant changes to the product.
It might also be reasonable for a firm to decide that providing continuity of cover meets a customer’s best interests, where there is no evidence to show the contract is inconsistent with the customer’s demands and needs or wouldn’t otherwise be unsuitable.
Firms will obviously also need to ensure that they comply with all relevant legal requirements in relation to their contracts. If, once the customer is better, they contact the firm to say that the policy did not meet their needs, then we expect firms to treat them fairly.
We are aware some firms may wish to make mid-term changes to their existing policies and put policyholders on notice of the change.
We expect firms to consider the following if they intend to vary their contract terms:
- Whether there is a written term in the contract that states they are able to make the change that they want to make.
- Are the terms that they intend to rely upon fair and transparent under the Consumer Rights Act 2015 (or the Unfair Terms in Consumer Contracts Regulations 1999 if appropriate)?
- Whether they are applying the term properly, in accordance with the contract (for example, by complying with any notice period set out in the contract).
- Whether due regard has been given to the interests of their customers and treating customers fairly (per FCA Principle 6). Also, to the information needs of their customers and communicating information in a way that is clear, fair and not misleading (per FCA Principle 7).
- Whether there is any other reason in law or any other relevant FCA rules, and whether they are complying with them.
Expectations of brokers
In these uncertain times, brokers have a key role to play to help consumers understand the market, the impact of coronavirus, and search the market for products that meet their demands and needs.
We encourage brokers to keep abreast of market developments so they can suitably advise their customers.
30/06/2020: Information changed MOT section updated following Department for Transport update on MOT extensions
29/06/2020: Information added Updated information on travel insurance
16/06/2020: Information added Statement on the FCA’s and PSR’s joint approach to Access to Cash
03/06/2020: Link added Latest news section confirming guidance for insurance firms on assessing product value
14/05/2020: Link added Latest news section confirming measures to help insurance and premium finance customers
06/05/2020: Information added Access to premises paragraph
01/05/2020: Information added latest news
31/03/2020: Information added Information for firms considering making changes to their existing policies at renewal