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Law360, London (July 8, 2020, 5:54 PM BST) -- European insurance companies should offer remedial action to customers over insurance products that have been affected by COVID-19, the European Insurance and Occupational Pensions Authority said on Wednesday.
The EU's insurance watchdog has set out the steps it expects companies to take in an effort to "clarify" its expectations on how insurers and intermediaries such as brokers should handle consumers during the crisis.
"It is vitally important that insurance companies place the fair treatment of customers at the heart of their response to the COVID-19 pandemic," EIOPA said. Insurers must identify products whose main features or whose risk coverage has been affected by the coronavirus, the association said.
Insurers should assess whether there is a risk that customers could be treated unfairly in cases where they might be buying products that no longer offer good value.
"The assessment should be on a medium- to longer-term basis, to take into account product life cycles and the evolution of the impacts of the COVID-19 pandemic," EIOPA said.
Insurers should consider in their assessments measures such as government lockdowns and their impact on the behavior of consumers, including mobility, liability risks and travel.
Their reviews should also consider key benefits and look into indicators linked to their products, such as claims ratios — the percentage of claims costs compared with the premiums earned.
"Minor temporary fluctuations should not be considered material," EIOPA added, but warned that it expects insurers to take steps when there is a possibility of unfair treatment.
The regulator has told insurers that the measures will need to be "proportionate" and that they should consider legal requirements in national civil law as well as insurance law.
EIOPA's Wednesday statement follows its announcement in April, when it asked the market to consider implementing measures that would help consumers. It also said that unfair treatment of consumers because of disruption to markets is a "risk to the entire sector."
The association asked insurance companies to provide clear information to customers and keep them informed about contingency measures. The industry should also be flexible with consumers where practical, it said.
Governments and industry are seeking to tackle the impact of COVID-19 on businesses and consumers. French insurer AXA recently said it expects to suffer a €1.2 billion ($1.3 billion) hit to its 2020 earnings from coronavirus-related claims.
--Editing by Ed Harris.
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