Incoming Financial Conduct Authrotiy (FCA) rules aimed at providing better value for insurance customers have far reaching implications for everyone in health insurance, according to Branko Bjelobaba principal at consultancy Branko.
Last month, the FCA published a document containing new rules to improve the way general insurance and protection markets function following its consultation and the final report of its Market Study, published in September 2020.
As Health & Protection reported, the document excludes health insurers and cash plan providers from FCA rules surrounding the automatic annual renewal of general insurance contracts.
It also requires protection products to be assessed to ensure they offer fair value to consumers, including those policies originated before October 2018, and revealed the FCA is is planning to introduce fresh demands on advisers and intermediaries to ensure they are operating in the customer’s best interests at all times.
Elaborating on what the rules means for the market, Bjelobaba (pictured) told Health & Protection: “This policy statement will need to be considered by all in the sector to include private medical insurance (PMI), cash plan, dental cover and other health-related covers including those sold many years ago.
“Firms have until 30 September 2021 to implement the new rules around systems and controls, retail premium finance and product governance and a further three months to implement the rules on pricing, auto-renewal and reporting so timing is tight.”
On auto-renewal Bjelobaba added that insurers and intermediaries will be happy with the concession that these can still happen, thus covering those customers with pre-existing conditions and/or acquired benefits who simply forget to do renew.
‘Better value options should be offered’
But he noted there were other significant requirements as a result of the rules.
“Under the new governance rules, firms have to ensure products provide fair value for a reasonably foreseeable future and this could extend to the customer’s lifetime as some products are for a long term and benefits may reduce over time,” he continued.
“Consideration must also be given to legacy products that are no longer sold as these too may continue to be paid for.
“Insurers will have to report a shed load of data and analyse what is being paid and where claims ratios tell them people may have forgotten that they even have the cover, then active dialogue with the customer may be needed.
“Similarly, if a newer contract provides better value then a switch should be offered especially where the likelihood of claims changes over time.”