The FCA confirms guidance for insurance firms to consider the impact of coronavirus (Covid-19) on the value of their insurance products.
The guidance sets out what the FCA considers firms should be doing to identify any material issues that affect the value of the general insurance and protection products they offer, and their ability to deliver good customer outcomes, during this unprecedented time.
The guidance sets out that firms should focus on reviewing products where benefits cannot be provided (e.g. boiler services due to lockdown measures) or where there has been a fundamental change in risk and products are now providing little or no utility to customers (e.g. public liability insurance for closed businesses).
The guidance is not intended to create an expectation that firms should reassess the value of insurance products where the likelihood of a customer making certain claims may have fallen, but the product continues to provide utility (e.g. motor insurance where, for example, theft or fire can still occur).
Firms should review their product lines and decide on any resulting actions within 6 months. This might include changing how benefits are delivered, refunding some premiums or suspending monthly payments for a certain period of time.
The FCA is publishing its finalised guidance, subject to a small number of changes. This includes changes to clarify that firms:
- should consider the value of products where, due to the impact of coronavirus, there has been a material reduction in risk so that they are providing little or no utility to customers, and not just where claims are no longer possible
- are not expected under this guidance to assess value on an individual customer level, but should consider the FCA’s guidance on helping customers in temporary financial difficulty as a result of coronavirus
- can assess the longer-term impacts of coronavirus on their insurance products on an ongoing basis beyond the 6-month period the FCA has set out for product reviews resulting from this guidance.
The guidance came into effect on 3 June 2020 and will be reviewed in 6 months in light of developments regarding coronavirus and may be revised if appropriate.
Customers who are struggling to afford their insurance or premium finance payments because of the impact of coronavirus should contact their insurer or insurance broker to discuss options.
