Insurance – Q3 2022

FCA expectations on cost of living and insurance

The FCA set out its expectations of firms in the insurance sector which included:

• Treatment of vulnerable customers and customers in financial difficulty.
• The need to ensure all products provide fair value and meet customer demands and needs.
• Premium finance and whether it provides fair value for customers.
• Underinsurance and the need to ensure products meet customers’ demands and needs.
• Claims and the requirement to handle them fairly and promptly.
• Multi occupancy buildings insurance and the need to take leaseholders into account in fair value assessments.

Firms should take steps to ensure that they are properly prepared to support their customers during this challenging time and produce good customer outcomes in line with the Consumer Duty.

FCA review of business interruption claims handling

The FCA published a review of business interruption insurance claims handling. This review highlighted lessons to be learnt and applied to achieve good customer outcomes in the future. The FCA included some valuable lessons for all claims functions ahead of the Consumer Duty implementation. These included:

• Proactive and tailored communication, as set out in ICOBS 6.1.6BR.
• Having a range of customer communication channels available.
• Tailored information requests.
• Correctly identified vulnerable customers provided with the appropriate level of care, in line with FG21/1.
• Appropriate oversight of the claims journey from Senior Management.
• Conduct focused management information.
• Oversight and monitoring of delegated partners.
• Easily accessible policy wordings.
• Quality assurance that considers the entire claims experience.

As a result of these findings and the impending New Consumer Duty, the FCA is encouraging firms to undertake a review of their claims processes and procedures. This will include any outsourcing arrangements to make sure they remain effective in mitigating customer harm.