FCA Mulls Extending Travel Refund And Insurance Rules

By Lucia Osborne-Crowley
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Law360, London (February 12, 2021, 1:38 PM GMT) -- The U.K.'s financial regulator said on Friday that it is considering extending its temporary COVID-19 guidance that instructs insurers and lenders to prioritize the fair treatment of consumers who request refunds for trips and events canceled amid the pandemic.

The Financial Conduct Authority is asking the sector for responses to a plan to extend the emergency guidance governing refunds, which was due to expire in April. The guidance warns finance firms, particularly insurers and lenders, to process refunds for trips or events canceled because of the coronavirus outbreak speedily and fairly.

The City watchdog emphasized that consumers might also be able to make a claim with their credit or debit card provider or their travel insurer, as well as their travel agents or event organizers. It wants insurers and card providers to communicate clearly with customers about all the refund options available to them.

"Since the outbreak of the coronavirus pandemic there has been an unprecedented number of trips, holidays and other events canceled," the FCA said. It added that it is "proposing that this guidance should remain in force during the exceptional circumstances arising out of COVID-19, until varied or revoked."

The regulator urged finance companies to minimize complexity and delays in refunding customers. It also warned they should be clear with consumers about whether they should first approach their insurer or their credit or debit card provider. The FCA said it is not in a consumer's interest to be passed from pillar to post. 

The sector has until Feb. 26 to respond to the consultation.

The FCA published instructions for dealing with refunds in October, following a consultation in July. The watchdog warned at the time that insurers should not make policyholders go to "unreasonable lengths" when they make a travel insurance claim.

It is not right that insurers expect customers who have had holidays canceled to initiate legal proceedings against tour operators or hotels before they can claim on their insurance policies, the FCA said.

In the case of a consumer who has contacted their tour operator to seek a refund it would be enough to show an insurer an email history. It would also suffice for policyholders to show their insurers that they had made "several unsuccessful attempts" to get their money back.

The Association of British Insurers, the sector's trade body, said in April that insurers would probably pay out £275 million ($380 million) in travel claims as a result of global disruption.

The pandemic has prompted nearly half of insurers to suspend all sales of travel cover to new customers. Other insurers continued to sell products, but with exclusions for COVID-19.

--Additional reporting by Martin Croucher. Editing by Joe Millis.

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