This article was written by Anna Davis.
EIOPA strongly encourages insurers and intermediaries to take into consideration various practical implications of the Coronavirus outbreak for the day-to-day activities of consumers, in particular with regard to the social distancing and self-isolation measures that are now in place. In the current environment, consumers may not be able to fulfil contractual obligations or may be forced to change their normal behaviour. Examples include:
- Not being able to submit a claim within a prescribed timeframe
- Not being able to carry out a check (e.g. a car check-up or a medical check-up)
- Using their usual residence as a workspace, which may be in breach of their household policy.
EIOPA expects all market participants to continue to act in the best interests of consumers, throughout the lifecycle of their relationship with the consumer. In particular, EIOPA asks the following of insurers and intermediaries:
1. Provide clear and timely information to consumers on contractual rights. Inconsistent treatment of exclusions could lead to consumer detriment and wider reputational damage for the insurance sector. It is crucial in these times of distress and pressure that consumers understand and are aware of the scope of their cover, the exemptions that apply and the impact of Coronavirus on their insurance policies.
2. Treat consumers fairly and be explicit in all communications. EIOPA expects market participants to treat consumers fairly and be explicit in their communication with consumers. They should avoid vague terms that could be misinterpreted or lead to confusion. In their communications, market participants are also expected to take into account how consumers may react to volatile markets with the aim of mitigating risks of consumer detriment. All communications should be balanced and carefully calibrated.
3. Inform consumers about contingency measures that the firm is taking. Consumers should also be informed about how these measures can impact their contractual relationship and services provided. Some examples of possible impacts, include:
- Continuity of services (e.g. moving services to online channels in greater extent);
- Validity of insurance contracts (e.g. temporary automatic extension for the duration of the emergency situation);
- Changes to claims management procedures or other consumer services;
- Additional organisational arrangements to deal with consumer inquiries related to Coronavirus (e.g. publication of FAQs for consumers, contact details, helpline etc.).
4. Continue applying product oversight and governance requirements, taking into account the impact of Coronavirus; where necessary carry out a product review. Product reviews should be aimed at assessing, where relevant for the product, the impact of the outbreak on the main features of existing products to assess whether they remain consistent with the needs, characteristics and objectives of the identified target market and if not take relevant measures.
5. Consider the interests of consumers and exercise flexibility in how they are treated, where reasonable and practicable. In particular, the current situation may call for flexibility in terms of processes and timeframes to allow consumers to retain important coverage that would otherwise be lost.
EIOPA also notes that in the case of a widespread pandemic, the pooling of risks necessary for insurance may be difficult to achieve, setting boundaries on what the sector can offer. As a general principle, imposing retroactive coverage of claims not envisaged within contracts could create material solvency risks and ultimately threaten policyholder protection and market stability, aggravating the financial and economic impacts of the current health crisis.