Now that the transition period has ended, a key focus for UK-based general insurers continues to be minimising the disruption for EEA-based customers (including expats), or policies with certain EEA risks. Firms should have been communicating with customers on the impact of Brexit on their policies and should continue to keep customers informed of any new developments and ensure they are treated fairly.
Servicing your EEA customers now that the transition period has ended
If you have customers based in the EEA, you should already have decided on your approach to servicing your existing contracts with them. For example, many firms have moved or are moving EEA customers’ policies to an EEA entity, for example by means of a Part VII business transfer. You should have taken the steps available to you to continue to service customers in accordance with local law and national regulators’ expectations.
The European Insurance and Occupational Pensions Authority (EIOPA) published recommendations[2] for the insurance sector in light of the United Kingdom’s withdrawal from the European Union. The recommendations are addressed to national regulators and aim to minimise detriment to policyholders and beneficiaries now that EU law as a result of the UK leaving the UK.
EIOPA recommends that certain types of general insurance contracts provided by insurance firms to consumers who were resident in the UK but have since moved to the EEA should not be regarded as cross-border contracts. We welcome this recommendation.
However, these are just recommendations and whether you need regulatory permissions in a local EEA jurisdiction depends on local law and the approach of the local authorities in that jurisdiction, which means it is important that you have discussed your plans with them.
We expect firms to act in accordance with local laws and local regulators’ expectations, while making sure their decisions continue to be guided by obtaining appropriate outcomes for their customers. It would clearly be a bad outcome for a consumer not to receive the payment of a valid claim or any other payments they’re entitled to.
We know this may involve different considerations in different circumstances. There’s more guidance on our expectations in relation to long-term contracts with rights and options on our life insurers’ pension and retirement income page[3].
Business transfers
The UK Parliament has legislated for a Part VII ‘saving provision’ that means that certain business transfers can proceed by reference to the pre-existing tests, and not to those in Part VII as applicable from the end of the transition period. This will provide up to two years from the end of the transition period for parties seeking to rely on the scope of the pre-existing regime to obtain a UK court order sanctioning the transfer of insurance business.
It will apply where the process for seeking the sanction of the insurance business transfer scheme was already underway at the end of the transition period (under the previous Part VII regime), demonstrated by firms showing they have met two conditions: payment of the regulatory fee and approval of an independent expert.
Firms should note that the mutual recognition framework contained in the Solvency II Directive (where EEA states recognise the legality of schemes sanctioned in other states, where the process set out in Solvency II has been followed) will not apply to insurance business transfers sanctioned by the UK courts after the end of the transition period, even if they fall within the saving provision.
Instead, recognition will depend on the national regimes in each EEA jurisdiction where there is an affected risk or commitment. Therefore, insurers intending to rely on the saving provision as part of their plans to enable them to continue to service EEA risks/commitments should engage proactively with relevant EEA authorities.
Distribution
It is important that UK insurance intermediaries and brokers intending to continue their distribution activities to EEA policyholders and for EEA risks, have now agreed arrangements with local regulators and sought legal advice as appropriate.
There are various models proposed for the continuation of this activity and it is a complex area. Having these arrangements in place is important to ensure the continuity of service and the appropriate contingency steps should have been undertaken in a timely manner in the run up to the end of the transition period.
Exiting business
If you have decided to stop servicing customers in the EEA now the transition period has ended, we expect you to ensure your customers are treated fairly when winding down business.
Customers should continue to be informed in a timely manner of any such decisions and given clear and useful ‘next steps’ information and advice. For example, this may have involved supporting customers while they are in the process of finding alternative providers.
Travel
Travel insurance
We expect you to have considered and prepared for the potential impact of the end of the transition period on customers’ travel insurance contracts and to have already contacted your customers if they are impacted. We expect you to have proactively and clearly communicated to customers any Brexit-related changes to their contracts; or if a travel policy contains a provision that invalidates or limits a claim as a result of Brexit.
When it comes to travel insurance, as with other types of cover, you must treat customers fairly during the whole product cycle of purchase, claim and renewal. We expect you to communicate clearly to both new and existing customers the cover provided under their policy and any policy changes or exclusions that may impact the cover resulting from Brexit.
You must not unreasonably reject claims. This includes relying on provisions to reject or limit claims as a result of Brexit, where it would be unreasonable to do so in the circumstances, including how clear the relevant provision was to customers. You should be aware that consumer rights legislation makes clear that where there is ambiguity in a consumer contract, it will be given a meaning favourable to the consumer.
You should be prepared and ready to address customer queries accurately, fairly, clearly and promptly. This includes being adequately prepared for the possibility that you may now start to receive a significant increase in consumer queries.
Green cards
Green cards are an international certificate of insurance guaranteeing that motorists have the necessary third-party insurance cover for travel. As the UK has now ceased to be a part of the European free circulation zone, UK motorists will need to carry a valid green card when driving their vehicles in participating countries. We do not regulate the provision of green cards, but we do want to ensure that insurers meet their obligation to pay due regard to the information needs of their consumers.
Motor insurers should have informed consumers of the necessity for green cards in relevant countries. They should ensure customers are clear about the process necessary to obtain a green card and are able to receive one if required. We understand some insurers have been providing green cards to customers proactively.
Green cards may be invalid if they are not in the correct format. In particular, green cards must be printed (though it does not need to be on green paper) – a PDF on an electronic device will not be accepted. You should consider consumers’ ability to obtain a green card in the correct format and, where appropriate, proactively provide them to your customers. You should have taken steps to ensure that any operational changes necessary for the production of green cards are in place.
European Health Insurance Card (EHIC)/ Global Health Insurance Card (GHIC)
The EHIC entitles individuals to state-provided medical treatment in EEA countries. The Government has indicated that, from 1 January 2021, there are changes to who can rely on an EHIC and when.
On 11 January 2021, the Government launched the GHIC[4], which will gradually replace the EHIC.
We don't regulate the provision of EHIC or GHIC and we aren't the appropriate authority to comment in detail on any changes here. Our focus is on how insurers communicate with customers about how Brexit affects their insurance. To the extent that the changes in relation to EHIC and GHIC have an impact on a customer’s insurance policy, we expect you to have communicated this in a clear and timely way
See the Government’s visit Europe from 1 January 2021[5] page for more information.