Britain’s financial regulator told insurance companies on Thursday that they must be flexible in how they treat customers who are having to change travel and work plans because of the coronavirus pandemic.
In new guidance to the providers and buyers of travel, motor, home and medical policies, the Financial Conduct Authority said it “would not expect to see a customer’s ability to claim affected by circumstances over which they have little control”.
The rapid spread of the virus, which has seen more than 200,000 people infected globally, has left companies and individuals affected by the knock-on effects trawling through their insurance policies to see if they might cover costs.
In the case of travel insurance, the FCA told insurers they must clearly communicate any policy exclusions that result from coronavirus to their customers.
Travel or holidays booked before March 1, with related travel insurance in place at the time of booking, will be covered “in most cases”, the regulator said. It explained that policies bought before that date tended not to have coronavirus specified as an exclusion.
In addition, where customers are now relying on the renewal of an annual policy to cover them for forced travel cancellations later this year, the FCA expects companies to “renew or consider claims under the terms of the original policy”.
However, customers buying brand new travel policies have been advised to speak to insurance providers to discuss the cover that best suits their needs, as the FCA warned “there may be instances where cover is not available”.
Motor and home insurers have also been told that they must not reject customer claims because policyholders have had to change their behaviour, in response to government social distancing advice. These changes include using cars to commute to work, or conducting business activities from their home addresses.
Withdrawing insurance products from sale to reduce the risk of claims will not be allowed where customers are relying on a renewal for continuity of cover, the FCA added. It reminded companies that they needed to be “taking into account any vulnerabilities”. According to the regulator, scrapping policies could be a breach of insurers’ requirements to treat customers fairly.
Similarly, companies will not be allowed to sell customers alternative products that do not properly meet their needs.
Interim FCA chief executive Christopher Woolard, who took over from new Bank of England governor Andrew Bailey on Monday, said: “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.”
Earlier on Thursday, Direct Line said that its Covid-19 related travel claims had increased from £1m on March 3 to £5m by March 15, but noted that it had reinsurance cover totalling £18.5m for travel claims. It may benefit from coronavirus disruption in some other ways, though, as it expects fewer motor insurance claims following UK government advice against non-essential travel.
Gareth Shaw, head of money at the consumer protection organisation Which?, said: “Many people are confused and concerned about what sort of protection their insurance gives them for coronavirus-related claims, so it’s right that the FCA is spelling out its expectations for firms and making it clear that they have a responsibility to treat customers fairly.”