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.
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.
We expect firms to communicate clearly to both new and existing customers the cover provided under their policy and any policy exclusions that may impact the cover under each section of cover resulting from coronavirus.
When selling an insurance policy, firms are required to only propose cover that is consistent with a customers' demands and needs. There is a broad range of cover available in the travel insurance market. When selling travel insurance, we expect firms to ask customers questions to establish an individual customers' demands and match the products they are offered to these.
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, we expect insurers to renew or consider claims under the terms of the original policy for these travel arrangements.
When handling claims, insurers must treat customers fairly. In part, this means providing reasonable guidance to help a policyholder make a claim, not unreasonably rejecting a claim, and settling claims promptly. Insurers will also understand that the coronavirus pandemic is a stressful time for some customers and we expect them to take this into account when dealing with claims. We have recently published firm and consumer pages regarding this.
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