"The exceptional circumstances of coronavirus may have materially reduced the value they are getting."
The FCA says the "exceptional circumstances" of coronavirus may have materially reduced the value that customers are getting from their insurance products.
The regulator is today confirming guidance for insurance firms to consider the impact Covid-19 has had on the value of their products.
The guidance sets out what 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.
The FCA says 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 says it does not expect firms to 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).
In its guidance, the FCA says 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.
"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."