The Financial Conduct Authority (FCA) has confirmed 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 regulator said 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).
The FCA added that firms should review their product lines and decide on any resulting actions within six months. This might include changing how benefits are delivered, refunding some premiums or suspending monthly payments for a certain period of time.
Sheldon Mills, interim executive director of strategy and competition at the FCA, said: “Customers should expect value from the insurance products that they buy, but the exceptional circumstances of coronavirus may have materially reduced the value they are getting.
“Today’s guidance is designed to protect consumers by directing insurance firms to review the products they offer to ensure they provide appropriate value and take action where there has been a fundamental change in risk or where certain benefits can no longer be provided.”
He added: “Firms may choose to go further than this guidance, and we recognise that some firms have already taken steps to support customers, which we welcome.”