The FCA has just released a statement reminding insurance firms of the guidance that it published back in June, which set out its expectations for insurers and insurance intermediaries to consider the value of their products in light of the exceptional circumstances arising from the pandemic.
The June guidance set out the FCA’s expectation that firms would identify any material issues caused by the COVID-19 pandemic which could have an impact on “the value of their products, and their ability to deliver good customer outcomes”.
Firms are expected to prioritise assessments of product value where “the firms or the product itself cannot deliver a benefit, or where there has been a reduction in the risk of an underlying insured event happening so that the product now provides little or no utility to customers.” Firms should also ensure that their products meet the needs of their target market.
Once firms have made the required assessment, they also need to consider what actions it might be appropriate to take in relation to those products which do not deliver value. For example, firms may decide to deliver benefits in a different way, reduce premiums, or partially refund premiums which have already been paid.
The FCA’s statement confirms that firms are required to complete the reviews of the value of their products, and decide on what actions to take, by 3 December 2020. In accordance with their existing obligations, where issues which may adversely affect customers are identified, firms should notify customers of any issues alongside any action being taken to address them.
Once firms’ assessments are complete, they should continue to monitor the risks posed by COVID-19 as part of their normal process of product governance.
Insurers and intermediaries should ensure that they are complying with the FCA’s guidance, and should complete the assessments of the value of their products, and implement any actions flowing from those assessments, before the deadline of 3 December 2020.
The FCA is clear that the effects of COVID-19 on insurance product value are likely to continue for quite some time and have the potential to cause significant harm to customers. Firms will need to continue to be mindful of these negative effects, and continue monitoring their insurance products, even beyond the December deadline.