While the UK travel insurance market contends with an unprecedented level of disruption brought about by the coronavirus (COVID-19) pandemic, lockdown measures around the world will eventually ease and the demand for travel insurance will resume.
The Foreign & Commonwealth Office currently advises British nationals against all but essential international travel1, and many significant travel insurers have paused the sale of new insurance policies2 while the advice against overseas travel is still in place.
Not only have travel insurance sales been put on hold, but significant regulatory changes affecting customers with pre-existing conditions have too.
On 7 April 2020, the Financial Conduct Authority (FCA) postponed new signposting rules originally scheduled for November, which would require firms to refer certain customers with pre-existing medical conditions to a directory of specialist providers with the intent of helping them find cover more suited to their needs at a more affordable price3. However, firms will still be required to include details of the directory on their respective websites once it has been launched by the Money and Pensions Service (MaPS).
The FCA has yet to confirm the new implementation date for signposting rules, allowing firms to focus their efforts on preventing and mitigating harm to customers during the pandemic.
There is increasing regulatory pressure on insurers to underwrite travel insurance more inclusively for customers with pre-existing conditions, not only from the FCA, but also the European Insurance and Occupational Pensions Authority (EIOPA), the European Union’s insurance regulatory institution. In 2019, EIOPA issued a warning to the travel insurance industry to address a number of consumer protection issues – including those relating to pre-existing conditions – that it intends to support through intensified supervisory scrutiny and actions.
As the FCA signposting rules encourage insurers to direct potential business elsewhere, insurers may need to evaluate whether their coverage options offered are right for the needs of their customers, ensuring all healthcare needs are covered abroad at an appropriate price. And with EIOPA’s warning to the travel insurance industry, there is increasing pressure to reform.
How will the signposting work?
One of the central goals of the new signposting rules is to improve the travel insurance market by helping customers with pre-existing medical conditions have better access to insurance products that cover their conditions.
The FCA’s changes will require all firms that offer retail travel insurance to signpost certain consumers with pre-existing medical conditions to a directory of specialist providers. This will apply to insurers, Lloyd’s managing agents and other intermediaries, and other providers such as banks that provide packaged bank accounts to include travel insurance4.
Firms that sell policies that exclude pre-existing conditions will also be required to tell consumers whether and how these exclusions can be removed5.
The FCA will also provide firms with guidance to remind them to assess the risk from medical conditions and calculate medical condition premiums using reliable information that is relevant to assessing this risk. The Authority suggests this will help make sure that consumers are quoted a fair premium which properly covers their circumstances6.
Furthermore, where a customer has a premium loading of £100 or more due to their pre-existing medical condition(s), firms will be required to signpost customers to the MaPS directory. Firms will also need to direct customers in instances where a medical condition exclusion cannot be removed from the policy7.
Pressure to underwrite more inclusively
There is still considerable uncertainty around the future of the travel insurance market, what travel insurance policies may look like coming out of the coronavirus pandemic, and what the wider impact of the FCA signposting rules will be. Verisk and a panel of experts sought to address these issues in our Verisk Vision session, ‘Brexit, COVID-19, and the Future of Travel Insurance’.
Panellists suggested there will be an increased focused on the details of policies so that customers know exactly what they are covered against, whether that be in the context of coronavirus and their own medical conditions, cancellations and other exclusionary language.
If travel insurance customers discover at the point of claim that their medical costs are not covered, this can have negative repercussions for the insurer, regardless of how clear the initial terms were.
The Risk Rating team at Verisk has over 20 years’ experience increasing the accessibility of the travel insurance market to customers with pre-existing medical conditions by providing insurers with medical risk assessment tools that help them underwrite more inclusively. While the full impact of the FCA signposting rules and EU warning around consumer protection issues have yet to be realised, Verisk is well placed to assist the travel insurance industry in adapting to this new landscape.
- Foreign Travel Advice, UK Government, <https://www.gov.uk/foreign-travel-advice>, accessed 30th June, 2020
- Coronavirus: Nearly half of UK’s major insurers stop selling travel insurance, Independent, <https://www.independent.co.uk/travel/news-and-advice/coronavirus-travel-insurance-cover-holiday-claim-cancelled-a9440111.html>, accessed 30th June, 2020
- PS20/3: Signposting to travel insurance for consumers with medical conditions, Financial Conduct Authority, <https://www.fca.org.uk/publications/policy-statements/ps20-3-signposting-travel-insurance-consumers-medical-conditions>, accessed 30th June, 2020
- Signposting to travel insurance for consumers with medical conditions, Financial Conduct Authority, <https://www.fca.org.uk/publication/policy/ps20-03.pdf, accessed 30th June, 2020