It is crunch time for the insurance industry, which now must decide what Covid-19 refunds and discounts to give customers ahead of the deadline set by the city regulator.
Insurers have until 3 December to decide where, if at all, it is appropriate to apply Covid-19 related refunds or discounts on insurance policies.
The Financial Conduct Authority (FCA) has asked insurers to carry out a review into policy value in light of coronavirus, as the value of many insurance policies to customers has reduced because of the lockdown.
Examples of affected insurance includes motor vehicles – to what extent should premiums be refunded to make allowance for the fall in motor use? And medical insurance, as some services such as health checks have been unavailable.
Household insurance is also up for discussion, as customers have not been able to take advantage of boiler servicing and similar services, and so is employer liability or public liability insurance; as pubs, restaurants and retailers have been closed, they cannot benefit from the insurance policies.
Alex Barnes, a partner at accountancy firm BDO said the review will require due, thoughtful and documented decision making, supported by actuarial analysis.
“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,” said Barnes.
The partner said 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.
“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,” he added.