Time running out for insurers to consider COVID refunds review

Just 24 hours remain for insurers to consider regulatory guidance and, where appropriate, apply COVID-19 related refunds or discounts on insurance policies. Accountancy firm, BDO says this important review will require due, thoughtful and documented decision-making, supported by actuarial analysis.

The Financial Conduct Authority ordered the reviews as the value of some policies had diminished amid lockdowns, in particular motor, medical, household, EL and PL policies.
Insurers will have to decide whether they proactively offer discounts or refunds or only offer refunds if the insureds apply for one.

Alex Barnes, partner at BDO, says: “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.”

Alex explains that 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, Barnes added.

“It is likely that any action insurers have taken will be compared to the action taken by the rest of their peer group.”

“As this is a treating-the-customer fairly issue, fines and restitution orders could follow if the FCA thinks individual insurers have failed to take this review seriously and haven’t communicated with customers who have been adversely impacted.”

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