In light of the coronavirus pandemic, guidance and information within the insurance sector has never been more essential and today the FCA outlined its expectations for general insurance firms during the coronavirus (COVID-19) pandemic. It has also provided information for consumers about what they should expect to see from their insurance providers at this time. This information includes advice on a variety of topics from travel, motor, home and private medical insurance and provides clarification in relation to the suspension of products and policy renewals.
“We have already seen some firms make significant efforts in difficult operating conditions,” said interim chief executive of the FCA Christopher Woolard. “We expect all firms to be clear and not misleading whenever they communicate and be fair and professional in how they deal with their customers.”
Consumer behaviour is changing, he noted, and the FCA expects insurance firms to recognise this and to treat their customers fairly and to recognise the position customers may be finding themselves in.
“We would not expect to see a customer’s ability to claim affected by circumstances over which they have little control,” he said. “Any customer concerned about their insurance should consider contacting their provider with any questions they may have.”
Responding to this declaration of the FCA’s expectations, director of policy and engagement for the Chartered Insurance Institute (CII), Matt Connell said that where insurers have made a contractual agreement to cover response, they must honour that commitment.
“Our research through the public trust index shows that, with some exceptions, the insurance sector does meet customers’ expectations on claims, and the insurance profession must maintain this performance by handling claims related to COVID-19 both fairly and sensitively,” Connell said.
The overall economic impact of COVID-19 is huge, he said, and can only be mitigated by an organisation with the tax raising powers of a government. It is not in anyone’s interests to try to reinterpret insurance contracts in the light of recent events in order to make insurers the mechanism for a COVID-19 bail out, he stated, it would simply place responsibility on insurers that no private sector organisation could sustain.
“To give things some perspective,” he said, “in 2018 the London Market paid out £19.7 billion in claims, but the UK financial package for COVID-19 is currently £300 billion.”
As a result, Connell said, insurers should be allowed to set the levels of risk and cover that are consistent with their risk appetite but he noted that the CII wholeheartedly agrees with the FCA that these changes must be communicated effectively. These communications can only be clear if any changes in cover are done in a way that is consistent with the basic design and purpose of the product, he said, and with the basic purpose of the insurance firm.
“The issues for insurers that we are seeing from COVID-19 highlight the important of professional advice for consumers,” Connell said. “Although insurance has increasingly been thought of as a commoditised product, there is still a strong need for professionals who are able to talk to individuals and businesses about their circumstances and needs, and help them to plan a holistic approach to managing their risks, that includes insurance as a component of this wider solution.
“This is the only way of encouraging an understanding of what insurance can and can’t do, in a way that benefits consumers and helps them plan for the future.”