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Regulator: insurers should warn customers about Brexit impact


Insurers should keep abreast of Brexit developments and inform customers of the impact on policies as soon as that information is available, the UK financial regulator has said.

The Financial Conduct Authority (FCA) has warned insurers that its communications will be assessed according to rules set out in its Handbook.

"Firms need to consider what impact withdrawal from the EU may have on their own customers and the operation of contracts they offer," FCA chief executive Andrew Bailey said in a letter to trade body the Association of British Insurers (ABI) (3-page / 486KB PDF). "Firms must also consider all the relevant requirements in our Handbook for their contracts, including those relating to the information firms are required to give to their customers."

"In relation to withdrawal from the EU, firms will need to keep under review what, if anything, needs to be brought to customers' attention when buying or renewing a policy. Where changes to how policies operate are dependent on the final legal agreement reached by the UK and EU, firms may wish to provide this information in good time, once it is available. Where the information is not currently available firms may wish to do this separately to new business and renewal communications," he said.

Bailey appeared to acknowledge that insurers are themselves coping with uncertainty about the outcome of Brexit negotiations. He said that the FCA would review future communications in the context of "the situation that exists at the time the statement is made, including any uncertainty over the final agreement between the UK and EU,"

ABI director general Huw Evans had written to the FCA to ask for guidance on issues to do with Brexit.

"Communications for both new insurance contracts and renewals will soon start to cover policies that will still be in force when the article 50 period ends," Evans wrote. "There are several Brexit-related areas that might affect policyholders. These include motor and fleet insurance and the green card system and travel insurance and the European Health Insurance Card."

"We do not believe that new business communications and renewal letters are the best way to communicate Brexit-related uncertainties to our customers. Insurers feel it would be in the interest of their customers and in accordance with FCA rules to do a bespoke communication when the position is clearer," said Evans.

Evans had also highlighted that the effectiveness of some insurance contracts covering Europe would change if Brexit resulted in insurers losing passporting rights, which is the right to offer financial services in other EU countries.

He said that some EU insurers do not plan to establish a presence in the EU's 27 other countries. If those companies do not benefit from passporting rights then, he said: "policyholders need to be informed that there is a risk that in this scenario insurers may be unable to pay a claim or otherwise service the contract after Brexit”.

A lack of passporting could also affect insurance contracts offered by companies based in EU countries other than the UK, he said.

Bailey said that the Prudential Regulatory Authority (PRA) was encouraging insurers in this position to seek authorisation to operate in the UK, and that it viewed the giving of temporary permissions as only a fall-back solution.

On UK firms offering insurance in the EU he said: "Firms should continue to make appropriate arrangements to service their clients in the EU and engage with their local EU regulatory authority for guidance".

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