COVID 19 has impacted all aspects of daily life, including the relationships between the insurance industry and its customer base. Regulators of the insurance industry tend to have a dual role that encompasses “prudential regulation”, which focuses on the solvency and resilience of the sector, and “conduct of business” which focuses on how customers are treated. Set out below is a round-up of the key industry developments in conduct of business during the crisis and some general and sector-specific recommendations made by regulators in Ireland, the UK and Europe.
Communication, Clarity and Transparency
Regulators have emphasised the importance of communication between customers and insurers. Firms have been advised to proactively communicate the level of cover provided by individual insurance policies to customers. The Central Bank of Ireland (‘CBI’) has advised companies that any changes to the level of cover provided by existing policies in response to COVID-19 should also be communicated to customers. The Financial Conduct Authority (‘FCA’, UK) has reiterated that firms should ensure that all customer communications are clear, fair and not misleading .
The European supervisory body EIOPA and the CBI have provided guidance on some practical points. EIOPA advised that firms should inform customers of contingency measures that have been implemented and how these measures may impact their service (e.g. plans to move services to online channels). Insurers have been encouraged to be flexible and to take into consideration circumstances which prevent customers from fulfilling contractual obligations (e.g. not being able to submit a claim on time due to social distancing requirements).
Firms should ensure that customers who are looking to make a claim are adequately supported. Assistance should also be offered to customers who need help reviewing their policy to determine whether they are entitled to a claim.
Insurance Ireland announced a package of forbearance measures aimed at assisting customers through the COVID 19 crisis, including renewal flexibility, extensions of particular covers, and support for changes of property use. These measures should help the industry meet its obligations to treat customers fairly and go some way to addressing the regulators’ recommendations. However, it is important that these measures are monitored by stakeholders as the crisis develops, to ensure they continue to meet customer needs fairly and transparently and in doing so help maintain public confidence in the insurance industry.
Firms should clearly and promptly communicate any policy exclusions that result from the coronavirus to their existing customers. The FCA has stated that in the event where a consumer bought annual travel insurance to cover the risk of cancellation or curtailment, and are relying on a policy renewal to cover travel arrangements made before the coronavirus situation escalated, the terms of the current policy may allow for a pay-out when the event causing the cancellation or curtailment occurs.
Insurance Ireland has advised customers to check their policy documents as the scope of cover for travel insurance varies, with some policies covering non-refundable cancellation costs arising from a government directive against travel, but others excluding this unless an optional travel disruption extension has been purchased. It should also be noted that new policies sold since mid-March 2020 are likely to have amended terms to exclude cancellations arising due to COVID-19. It is important that this is made clear to policyholders who are purchasing or renewing policies.
Motor and Home Insurance
Many insurers are fielding queries on the implications of temporary change of use of property as working remotely from home becomes part of life for a large sector of workers. UK insurers have been advised by the FCA not to reject claims based on a customer’s understandable temporary change in how they use their vehicle and their home address. Insurance Ireland have noted that policyholders generally have cover for personal office equipment up to certain limits and that equipment provided by the employer is typically covered under the business’ material damage cover.
Insurance Ireland also announced that firms will not penalise customers who cannot get a driving license or NCT certificate as a result of the nationwide shutdown. This is in response to the government’s automatic extension of driving licenses and NCTs expiring between the beginning of March and the end of July by six months.
In recent days a request was made by Minister for Finance Paschal Donohoe for the industry to consider paying partial refunds to motor insurance customers in light of the reduction in vehicle use and expected claims at this time. Insurance Ireland has responded positively and committed to looking at how this could be rolled out, in a way that is sustainable and constructive.
Private Health insurance is purchased by a large cohort of the Irish population to provide cover for healthcare beyond what can be accessed within the public health system. In light of the COVID-19 pandemic, the Irish Private Healthcare Association (PHA) have entered into a partnership with the HSE to provide their resources to the public system to increase capacity. As a result, many of the regular services of private hospitals and clinics are unavailable.
The Private Health Insurance companies in Ireland have responded by announcing partial rebates to be issued to customers. The details of the relevant rebate vary by company and plan. In addition, the insurers are continuing to cover any claims for their customers that fall outside the private hospital agreement with the HSE.
According to the ABI, standard business insurance policies are designed and priced to cover standard risks and are therefore very unlikely to provide cover for the effects of global pandemics like Covid-19. There are some situations where a business would be covered. For instance, some coverage may exist if the business has purchased a non-damage, denial of access extension to a business interruption policy. Business owners are advised to consult their broker/insurer if they are unsure about what their policy covers their business for.
For further information or advice on how Mazars can assist you or your business, contact Olive Gaughan or your usual Mazars contact.