Insurers have just a few days left to decide how they need to consider the guidance and where appropriate apply COVID-19 related refunds or discounts on insurance policies before the FCA’s December 3 deadline expires, says BDO LLP, the accountancy and business advisory firm.
The FCA has ordered the reviews as the value of many insurance policies to customers has reduced because of the “lockdown” e.g.:
· Motor insurance – to what extent should premiums be refunded to make allowance for the fall in vehicle use
· Medical insurance – some services such as health checks have not been available
· Household insurance – boiler servicing or similar have not been available
· Employers liability or public liability insurance – pubs, restaurants and many retailers have been closed and therefore, can’t benefit from these insurance policies
Insurers will have to decide whether they proactively offer discounts or refunds or only offer refunds if the insureds apply for one. BDO says conducting this review will be important and will require due, thoughtful and documented decision making, supported by actuarial analysis.
Alex Barnes, Partner at BDO, says: “This is an important review at a time when many insurers are already dealing with a long list of other COVID-19 headaches. The business interruption Supreme Court cases and the huge number of claims from the travel insurance market have already made this one of the toughest years ever for insurers.”
Alex explains that the FCA will expect insurers to have documented a thorough review, to have had that review examined by the insurer’s compliance team and then reviewed and challenged at the Board level by Non-Executives. Adds Alex: “After the deadline expires, we expect that the FCA will be selecting some insurers for a thorough examination of how they have dealt with this issue. If no action to reimburse customers has been taken, insurers must be ready to explain their reasons for this.”
“It is likely that any action insurers have taken will be compared to the action taken by the rest of their peer group.”
“As this is a treating-the-customer fairly issue, fines and restitution orders could follow if the FCA thinks individual insurers have failed to take this review seriously and haven’t communicated with customers who have been adversely impacted.”