YOUR COMPLIANCE MATTERS:    Pre-Existing Medical Conditions (PEMCs)

Relevance:                 All firms offering Travel Insurance.

Action required:       Website addition and appropriate staff training

Earlier this year (and before the coronavirus pandemic took hold), the FCA published the results of its consultation on the introduction of

·        new requirements for firms to signpost certain consumers with PEMCs to a directory of travel insurance firms that are willing and able to cover consumers with more serious PEMCs; and

·        new guidance to clarify firms’ obligations when providing travel insurance to customers with PEMCs.

This was following extensive research in the two years before the consultation began in July 2019, which suggested that:

“We have found that some consumers with pre-existing medical conditions (PEMCs) face problems navigating the travel insurance market and finding affordable cover for their conditions. Some are declined cover, offered cover with exclusions for their PEMCs, or offered what they see as unaffordable premiums. To address this, we are introducing new signposting rules and guidance designed to help these consumers better navigate the travel insurance market and get better outcomes.”

The proposed changes aimed to:

·        reduce the number of uninsured consumers, who currently face a choice of not travelling or risk having to pay significant costs, including medical bills abroad;

·        reduce the number of consumers with PEMCs who are significantly overpaying for travel insurance;

·        reduce the number of consumers who feel frustrated and unable to navigate the market; and

·        increase consumer confidence and trust in the travel insurance market.

In addition to signposting, the FCA will be working with stakeholders to try to improve consumer understanding of the travel insurance market, including producing material on PEMCs.

·        This information will help consumers understand the implications of travelling with exclusions, and how factors such as country of travel can impact medical costs and therefore travel insurance premiums.

The changes were to be effective from 05 November 2020 but in April, the FCA announced it would allow firms to delay implementation of these measures, allowing them to focus on urgent priorities related to the coronavirus (Covid-19) pandemic.

However, in an announcement made at the end of July indicated that they “now believe firms should be in a position to implement the changes. As travel has resumed consumers with PEMCs will want to access specialist insurance. This is especially important as some travel cover may have coronavirus exclusions.”

So, what is now happening?

The changes now will:

·        Require firms to signpost certain consumers with PEMCs to a directory of specialist providers.

·        Introduce guidance that firms selling travel insurance policies that exclude PEMCs should tell consumers whether and how these PEMC exclusions can be removed.

·        Introduce guidance for firms reminding them to assess the risk from medical conditions and calculate medical condition premiums using reliable information that is relevant to assessing this risk.

o  This will help make sure that consumers are quoted a fair premium which properly covers their circumstances.

And, who does this apply to?

These changes will primarily be of interest to:

·        all firms that offer retail travel insurance, including insurers, Lloyd’s managing agents, intermediaries and appointed representatives;

·        banks that offer packaged bank accounts which include travel insurance;

·        insurance industry trade associations;

·        charities, particularly medical charities;

·        consumer organisations; and

·        consumers, primarily those with PEMCs.

What do these changes mean?

·        Where a consumer is turned down for travel insurance, given an exclusion that cannot be removed for a PEMC, or given a premium loading of £100 or more, firms must signpost to the newly-created directory.

·        The proposed implementation period was extended from three months to nine months, and now with the further delay due to Covid-19, firms have until 26 April 2021 to change their sales processes and information disclosure.

·        The proposal to have a publicly available directory hosted by the Money and Pensions Service (MaPS) is going ahead.

• MaPS is developing a directory of specialist insurance providers, which is expected for September 2020;

·        Existing signposting to specialist providers or to industry bodies can continue.

o  Directories other than the MaPS directory could also be set up provided they meet the FCA’s neutral criteria.

·        Price comparison websites must signpost when all their quotes fall into one of the three criteria above (i.e. turned down for insurance, given an exclusion or given a large premium loading).

·        A firm that is on the directory does not need to refer the consumer back to it again unless they decline to quote or offer cover only with an exclusion.

·        The wording of the signposting referral must meet certain rules and guidance.

• The intention is not to put people off from using the directory.
• The FCA has convened a working group to look at the medical screening process and the wordings used.

·        The FCA has moved away from requiring firms to provide paper copies of the directory on request.

What do firms need to do?

·        Directory:

o  Firms will need to decide whether they want to be listed on the new directory.

o  MaPS should already have provided information about how firms can apply.

o  Firms will also have to inform consumers of the existence of the directory within 30 days of it going live, and implement all requirements by 26 April 2021 at the latest.

·        Signposting execution:

• Firms should develop plans to ensure signposting is executed effectively across all relevant sales journeys.
• In particular, firms should consider whether the new requirements may lead to operational challenges at renewals where policies include PEMCs and premium loadings that exceed the £100 threshold.

·        Communications:

o  Firms will need to make the necessary changes to update their communications to include signposting, including for new business, renewals and mid-term adjustments.

o  Where firms offer travel insurance with exclusions for PEMCs that can be removed, they will need to tell the customer how they can do this.

·        Vulnerable customers and process loops:

o  Firms will also have to have systems in place to identify whether clients have been directed to them via the directory to establish whether signposting is still required.

o  In addition, firms need to consider the links with their vulnerable customer policies and procedures since it is most likely signposted customers would also present vulnerabilities.

What change do we make to our website?

Firms must include details of a Medical Cover Firm Directory on the page of its website where it markets travel insurance, and this must be in place within 30 calendar days of a directory going live.

We can assist you with any aspect of appropriate communications and website wording or relevant staff training, if you require it. As ever, all you need to do is ask us.