The Financial Conduct Authority (FCA) has directed insurance firms to consider the impact of coronavirus on the value of their products.
In guidance published today (June 3) the FCA set out what it considers firms should be doing to “identify any material issues from coronavirus that affect the value of their products, and their ability to deliver good customer outcomes”.
The regulator defined product value as “what the customer is paying for and the quality of the product or service it is intended they receive”.
According to the regulator, firms should review products where benefits cannot be provided, or where there has been a fundamental change in risk and products are now providing little or no utility to customers.
For example, the guidance cites that coronavirus may mean firms “are no longer able to provide expected contractual benefits, either in the expected form, to the expected timeframe, or at all”
This could include some medical cover where customers cannot access certain benefits, it said.
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.”
The FCA has also clarified that the guidance is not intended to create an expectation for firms to reassess the value of products where the likelihood of a policyholder making certain claims may have fallen, but the product “continues to provide utility”.
Insurance firms are expected to act on the guidance by December 3, including refunding premiums or suspending monthly payments for a period.
The measures are effective from today (June 3) and will be reviewed in six months “in light of developments regarding coronavirus and may be revised if appropriate” the regulator said.