The FCA has set out a list of new expectations for insurers along with guidance for customers to prioritise consumer fairness amid the coronavirus outbreak

The FCA expectation addresses how insurers should treat customers in each area of their business (Credit: PxHere)

The Financial Conduct Authority (FCA) has issued new expectations of insurance companies as containment measures in place due to the coronavirus pandemic may give some a policy loophole by which to deny claims.

The UK regulator urged them not to do so in a document on its website released today, setting out its expectations of how providers handle claims in several different lines of coverage.

Expectations around the much-discussed business interruption coverage, the policy type for which businesses not able to claim stand to lose out the most, were not given.

FCA interim CEO Christopher Woolard said: “We have already seen some firms make significant efforts in difficult operating conditions.

“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.

“Customer behaviour is changing. We expect insurance firms to recognise this and treat their customers fairly, recognising the circumstances customers may find themselves in.

fca coronavirus
FCA interim CEO Christopher Woolard says customer fairness is at the core of its expectations (Credit: FCA)

“We would not expect to see a customer’s ability to claim affected by circumstances over which they have little control.”

In a separate document on its website, the FCA issued information for customers concerned about how the current coronavirus pandemic might affect their insurance.

“Any customer concerned about their insurance should consider contacting their provider with any questions they may have,” Woolard added.

FCA expectations of insurers during coronavirus outbreak

Business continuity plans

The FCA opened its list of expectations with the need for insurers to have a “robust” business continuity plan for the “stressed situation” caused by the coronavirus pandemic.

Highlighted within such a plan was the need to have a senior manager responsible for its implementation, to ensure the inability to access the workplace doesn’t impede critical services and to address staff wellbeing in any change in working patterns.

The FCA added: “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.”


Travel insurance

The FCA said where travel arrangements were booked before 1 March, and customers are now relying on an annual policy renewal to cover their cancellation, it expects insurers to consider each customer’s circumstances and pay claims in some cases.

It said: “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, [insurers should] renew or consider claims under the terms of the original policy for these travel arrangements.”

At the same time, in its guidance to consumers, the regulator said a “disinclination to travel” to a destination, without official advice not to do so from government Foreign and Commonwealth Office, is unlikely to trigger a claim.

Likewise, if a customer travels to a country against government advice, their travel insurance is unlikely to be valid for the duration of their trip.


Motor and home insurance

Firms across the UK have implemented working from home policies that inevitably mean they’re conducting different activities at home, and keeping different equipment there than when they bought their home or motor policy.

The FCA said: “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.”


Private medical insurance

According to the FCA, private hospitals in the UK have been asked to assist the NHS in dealing with the increased volume of patients seen due to the coronavirus pandemic.

It believes this could reduce capacity for the non-urgent care of privately insured customers, and where this does occur, said it expects providers of health insurance to “communicate effectively, timely and compassionately with customers.”


Policy suspensions, renewals and adjustments

Insurers in the UK have been altering coverage to exclude losses caused by the coronavirus pandemic, or pulling it altogether, and while the FCA said it can’t prevent them from doing so, it did set out expectations around how it’s done.

In the case of renewals, such as the example given under the travel insurance section above, where an individual circumstance, especially in the case of vulnerable customers, permits a need for “continuity of cover” — the regulator said it “it may not be treating customers fairly” not to renew, even if the insurer is pulling the coverage out of the market altogether.

It added that where coverage is renewed, if there is a policy alteration that prevents a customer from claiming for losses related to the coronavirus pandemic, the changes need to be made “very clear, in a prominent position, to those consumers whose policy is due to renew”.

In the case of mid-term adjustments to policies, the FCA has a list of legal obligations related to its legislation on fairness as well as wider consumer rights law that must be fulfilled before any changes are made.