As Covid-19 continues to disrupt our economy and society, the FCA has reminded insurers and insurance intermediaries to review the value of their insurance products by 3 December 2020.
‘Product value’ refers to the quality and benefit that a customer receives from a product that they have paid for. The impacts of Covid-19 mean that some insurance products, taken out before the pandemic, no longer bring the intended value for customers. For instance, changed circumstances may mean that some insurance arrangements may not offer the same utility.
Firms, which are product manufacturers or product providers, should consider the impact of the pandemic on product value. This may include, for example, whether certain contractual benefits remained available during lockdown (e.g. boiler servicing), or whether lockdown or other circumstances related to Covid-19 have had material effect on the risk posed by a consumer or commercial customer. For instance, a public liability policy may be of reduced value to a business that has been unable to open.
The FCA expect that firms should prioritise a product level assessment in cases where the firm or the product cannot deliver a benefit or where the reduction in the risk meant that the product offered little or no use to consumers.
Where a product line does not offer the intended value, the FCA say that firms should consider the reducing premiums, providing partial refunds or offering alternative benefits.
The review is part of the FCA’s efforts in reducing harm and ensuring that all customers receive fair treatment.
Firms, under existing rules, should continue to review products on a regular basis to identify potential risks to the target market and whether the product, including its cost, is appropriate for the demands, needs and characteristics of that target market. The ongoing impact of Covid-19 should be considered as part of this process.
For further information, please contact your RWA Business Manager.