Last month the FCA confirmed temporary measures to help insurance policyholders and today the regulator has continued its efforts to support consumers by confirming guidance for insurance firms to consider the impact of coronavirus (COVID-19) on the value of their insurance products.
Discussing this update, the interim executive director of strategy and competition at the FCA, Sheldon Mills noted that customers should expect value from their insurance products and that the coronavirus may have materially reduced the value they are receiving. The guidance issued by the FCA today was created to protect consumers by directing insurance firms to review the value of the products they offer and to take action where there has been a fundamental change in risk, or where a certain benefit can no longer be provided.
“Firms may choose to go further than this guidance,” Mills said, “and we recognise that some firms have already taken steps to support customers, which we welcome.”
Under this guidance, firms should focus on reviewing products where benefits cannot be provided due to lockdown measures or where products are now providing little or no utility to customers. This update is not intended to create an expectation that firms should reassess the value of insurance products where the likelihood of certain claims may have fallen but where the product continues to provide utility.
Having reviewed their product lines, firms should decide on resulting actions within six months – actions that may include changing how benefits are delivered, refunding some premiums, or suspending monthly payments for a certain period.
The FCA’s finalised guidance is now being published, subject to a small number of changes, which include the clarification that firms:
This guidance comes into immediate effect, and will be reviewed in six months in light of any developments regarding coronavirus and may then be revised if appropriate.
