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 their 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.
- Have a Senior Manager responsible for business continuity and for managing the impact of coronavirus.
- 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.
There is currently a lot of consumer demand alongside fast-moving changes to risk, especially in the travel insurance market. Firms must ensure that they continue to treat their customers fairly during the whole product cycle of purchase, claim and renewal.
For existing customers with policies that are impacted by coronavirus (eg, future travel booked before the outbreak), we expect firms to clearly communicate any policy exclusions that result from coronavirus to their existing customers.
There will be some instances where a consumer bought annual travel insurance 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.
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.
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.
Updated guidance on MOTs
The Department for Transport has released a statement for consumers who have a car, motorcycle or small van MOT due in the next 6 months .
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.
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.