The FCA has warned insurers to make sure they treat vulnerable customers fairly and do not leave policyholders unprotected if they are coming up for renewal and products are being pulled from sale.

The regulator told insurers to ensure customers are not penalised for changes in circumstances that are beyond their control such as working from home or staying at a different address.

The regulator has also urged the industry to think carefully about their duties to customers when suspending products – for example, where vulnerable customer’s policies are coming up for renewal and suspending products might leave them with a gap in cover.

Mortgage Strategy reported yesterday that the Comparethemarket had suspended comparisons on accident, sickness and unemployment cover and income protection as it said insurers were pulling policies from sale and adding exclusions.

On private medical insurance the FCA says:

“Demand for access to hospitals is likely to increase. 

“We are aware that private hospitals have been asked to support the NHS.

“The exact nature of the support is currently unknown, but it is likely to have an impact on consumers who have private medical insurance and are currently, or due, to receive treatment.

“Most privately insured treatment is likely to fall under non-urgent care and may need to be delayed due to coronavirus.

“Insurers need to communicate effectively, timely and compassionately with customers.”

On product suspensions the FCA says:

“We understand that firms may decide to, or want to, suspend some product offerings.  

“While we appreciate that firms are trying to manage their exposure to risks, we want to make clear our expectations of how firms deliver this change.”

In these instances, the FCA says it expects that:

• Firms must consider the needs of their customers carefully, in particular where the customer is relying on a renewal for continuity of cover (taking into account any vulnerabilities). 
• In such circumstances, it may not be treating customers fairly if a firm were to not renew (even though the product would otherwise be suspended). 
• Consumers who are due to renew their policy should have the policy coverage and exclusions clearly explained to them in all circumstances. Any exceptional cases of policyholder need should be considered by the insurer and all changes need to be clearly communicated.
• Alternative products are not sold to consumers that do not meet their demands and needs, and not in their best interest.

On renewals the FCA says: 

• Firms considering making changes to their existing policies at renewal need to consider the existing requirements for product design. Firms making changes to policies must follow the appropriate processes for making these changes.
• If firms are changing their policies to exclude coronavirus, we expect them to make it very clear, in a prominent position, to those consumers whose policy is due to renew, that their policy has changed, and of the exclusion – both before renewal.
• We expect firms to consider the needs and particular circumstances of individual consumers (taking into account any vulnerabilities) when considering what may be an appropriate change to make. Firms must be able to demonstrate that they are complying with our rules and treating their customers fairly.
• We also expect firms to make it clear in other relevant communications about exclusions to potential consumers, to ensure their messaging is fair, clear and not mis-leading.

FCA chief executive Christopher Woolard says: “We have already seen some firms make significant efforts in difficult operating conditions. “Customer behaviour is changing.

“We expect insurance firms to recognise this and treat their customers fairly, recognising 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.”

For full details on the FCA’s warning see here.