PRODUCT VALUE AND CORONAVIRUS – FCA GUIDANCE FOR INSURANCE FIRMS  

YOUR COMPLIANCE MATTERS – PRODUCT VALUE AND CORONAVIRUS – FCA GUIDANCE FOR INSURANCE FIRMS

Relevance: All firms but the focus is particularly on product manufacturers.

Action Required: Product manufacturers to review the value of products before 3 December 2020.

On 3 June 2020, the FCA published its guidance for insurance firms on “Product Value and Coronavirus”.

The guidance highlights firms’ obligations to ensure the fair treatment of customers, bearing in mind the fact that the value of a specific product may have changed as a result of the pandemic.

To be clear, this is a review to be completed at product level. Any individual issues for customers relating to financial distress should continue to be handled on a case-by-case basis, based on the guidance already published.

So, the guidance mainly relates to product manufacturers (those that are responsible for signing off product content and cost) where existing product governance requirements already state that regular reviews should be undertaken.

The guidance relates to both retail and commercial products.

Action Required

The FCA expects product manufacturers to prioritise a product level assessment to consider products where, as a result of Coronavirus, and the lockdown:

·        Firms can no longer deliver expected product benefits (either in the expected form or within the expected time frame). This may be particularly relevant where the movement of service providers is restricted because of lockdown. Examples of this may include issues such as boiler servicing or repairs or some medical covers where customers cannot access certain benefits.

·        There has been a fundamental change in the likelihood of an event occurring which would be covered by the policy (examples given include public liability covers for businesses that are closed during the lockdown).

There is no expectation that a policy level review will be undertaken where the risk of a claim is simply reduced (for example, the reduced impact on motor insurance arising from lockdown).

Having reviewed the product, the expectation is that firms will consider options to:

·        Change the service delivery mechanism.

·        Add comparable benefits that compensate for the reduction in product utility.

·        Reduce premiums for a period.

·        Provide partial refunds.

Expected Impact

As mentioned above, the expectation is that these reviews will be carried out by product manufacturers because they are at product (not individual customer) level.

As always, if any individual guidance or assistance is required, do please get in touch.