The City regulator has told insurers it expects them to treat customers fairly and consider payments on claims they might usually reject.
The Financial Conduct Authority said the coronavirus had changed customers’ behaviour and insurance firms needed to take this into account.
Christopher Woolard, the interim chief executive of the FCA, said: “We expect insurance firms to recognise this and treat their customers fairly, recognising the circumstances customers may find themselves in. We would not expect to see a customer’s ability to claim affected by circumstances over which they have little control.”
With government advice suggesting people should work from home and avoid crowded spaces, the FCA said people may be using their properties and cars differently from when they bought insurance.
Typically, home and motor insurers will ask questions about use when a policy is bought and base premiums on this. Car insurance customers will be asked to indicate whether their vehicle is used socially or for work, while home insurance customers will be asked about their working practices.
The FCA said insurers should consider claims even where customers had initially indicated they would not be using their car or home for work.
“We expect motor and home insurers not to reject claims because of a consumer’s understandable temporary change in how they use their vehicle and their home address, in response to government advice and the emerging coronavirus situation,” the FCA said.
In recent days many insurers have pulled policies from the market or amended what they cover, with customers looking for travel insurance the hardest hit.
The regulator said it could not prevent this from happening but told the industry it expected them to communicate changes and make sure the cover still met consumers’ needs.
For customers relying on annual travel insurance that they renew each year, the FCA said it expected insurers to take policyholder’s circumstances into account. “Where appropriate, renew or consider claims under the terms of the original policy for these travel arrangements,” it said.
The Association of British Insurers (ABI) lobby group said some members had been forced to take a commercial decision to stop selling policies such as travel insurance or trip disruption to new customers in recent days.
“Insurance is based on assessing the possibility of an event occurring. Insurers take account of when any risk becomes more of a probability than a possibility and then make commercial decisions,” the ABI said on its website.
It said its members were “doing everything in their power to keep their operations running as fully as possible and to offer clear and up-to-date information to their customers”.
On Tuesday the organisation sparked anger when it said many businesses would not be able to claim for losses resulting from the pandemic. It said standard policies did not include this level of cover and only a small number of big businesses had insurance that would pay out if they had to close.