UK regulator the Financial Conduct Authority (FCA) has said that it expects insurers to stretch the terms & conditions of policies to help the population adapt to the socioeconomic impact of coronavirus (COVID-19).
The FCA is in the process of making the re/insurance industry aware that customer behaviour is set to change as a result of the Covid-19 pandemic, and is guiding the sector on how to respond.
The expectation is that the sector should be flexible and treat customers fairly, particularly those in a vulnerable situation at the point of renewal.
Policy wording may also have to change in several areas due to the increasing amount of people working from home or commuting in to work by different means.
In addition to stretching T&Cs, the FCA expects to see clear communication of policy exclusions at the point of sale or renewal, as well as fair treatment of customers in travel insurance, particularly if they have bought annual travel insurance.
Further, insurers will be expected not to reject valid claims where home insurance excludes using the residence as a workplace, and not to change policy conditions in motor if cars are used to commute.
With renewals, the FCA asked insurers to carefully consider before suspending products if a customer is relying on the renewal for continuity of cover, and to take into consideration exceptional policyholder needs when making any changes/exclusions in coverage.
They should also avoid renewing with alternative products that do not meet customer needs, clearly communicate any change in coverage well before renewal, and be alert as to whether an exclusion is treating vulnerable customers fairly.
The FCA acknowledged that the behaviour it is guiding towards will likely have an impact on claims inflation in terms of both frequency and severity.
With insurers less able to aggressively change terms & conditions as COVID-19 exposures increase, the regulator expects underwriting margins to be somewhat impacted until the socioeconomic situation normalises again.
