UK Regulator Warns Insurers to Have ‘Robust’ Coronavirus Contingency Plans

By | March 19, 2020

The UK Financial Conduct Authority (FCA) reminded insurers on Thursday to have “robust” operational resilience and business continuity plans in place to respond to possible disruptions caused by the coronavirus pandemic.

The FCA expects firms to have “sufficiently robust systems and controls to continue to operate effectively in a stressed situation with business continuity plans to manage this.”

“Firms should consider, along with other challenges, the impact of staff absences and the need to ensure staff wellbeing on continuity of service,” said the March 19 dated notice from the FCA, titled “Insurance and coronavirus (Covid-19): our expectations of firms.”

“Firms must identify how staff absence or inability to use business premises can be sufficiently mitigated to ensure critical services are provided to customers,” added the FCA, noting that the insurers must make the regulator aware of any gaps in contingency plans.

“We expect firms to clearly communicate any policy exclusions that may impact the cover and use of individual policies. This applies both to new sales or changes to existing policies (either mid-term or at renewal) – they must clearly meet consumers’ demands and needs.”

As customer behaviors are likely to change because of the pandemic, the FCA also warned insurers to be fair to customers, by considering carefully their needs and showing flexibility in their treatment.

For example, the FCA said, customers may need to work remotely from home or commute by car, instead of mass transit. “We would not expect to see their ability to claim impacted by circumstances over which they have little control.”

Similar flexibility is also needed for other coverages such as travel insurance, homeowners insurance and private medical insurance, indicated the regulator. Communication with customers is key when products are suspended or coverage is excluded, the FCA 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,” said Christopher Woolard, interim chief executive of the FCA, in a statement accompanying the notice.

“Customer behavior is changing. We expect insurance firms to recognize this and treat their customers fairly, recognizing the circumstances customers may find themselves in. We would not expect to see a customer’s ability to claim affected by circumstances over which they have little control,” he emphasized.

In a section entitled “Expectations of brokers,” the FCA said: “In these uncertain times, brokers have a key role to play to help consumers understand the market, the impact of coronavirus, and search the market for products that meet their demands and needs. We encourage brokers to keep abreast of market developments so they can suitably advise their customers.”

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