MFSA to insurers: don’t shift the goalposts for COVID-19 claims

The MFSA has issued a circular to insurance companies, warning that it expected them to honour their policies with respect to an expected wave of COVID-19-related claims.

In the circular, published today, the financial services regulator pointed out that changes in terms and conditions relating to policies issued could not apply retrospectively or mid-term during the policy period.

Where policies offered cover for consequential loss, insurance undertakings were expected to clarify what would be covered in case of claims arising from COVID-19.  Whilst it would be acceptable for undertakings to limit consequential loss for new policies in the case of claims arising from COVID-19, any existing policies should not be subject to such limits, said the regulator. In the latter case, the cover for consequential loss should be that included in the original policy wording.

With regards to policies that cover medical conditions, “a blanket exclusion for claims arising out of COVID-19 is not acceptable” said the MFSA, adding that treatment for COVID-19 should be covered insofar as it falls within the limits established by the policy for such cover.

Where travel policies are concerned, the authority said it understood that cancellation costs covered were subject to the policyholders’ obligation to mitigate their loss, encouraging insurance undertakings to remind their policyholders of this obligation.

Insurance undertakings are obliged to ensure that their customer-facing solutions are sufficient to provide all the necessary information to determine their underwriting decisions with respect to all types of policies sold, said the MFSA’s circular.  In this regard, undertakings should assess whether they need to change their proposal forms or underwriting decisions to cater to this situation.  For example, for new policies, insurance undertakings may wish to start asking whether the client has been in high-risk territory.

Changes made to insurance products in the light of COVID-19 should be processed through the insurance undertakings’ product approval process which form part of their regulatory obligations relating to product oversight and governance, reads the circular, adding that any changes must take into account the best interest of the client.