FCA’s pre-existing medical conditions signposting rules: What does it mean for the industry?

The FCA’s new rules on signposting now requires all firms that offer retail travel insurance to flag certain consumers to a directory of specialist providers.

But this specialist directory has yet to be launched. 

The FCA announced that it was enforcing new rules on signposting last week in a bid to increase consumer confidence in the travel insurance industry.

One particular concession means that signposting is only required where a customer has a pre-existing medical condition (PEMC) loading of £100 or more.

Despite welcoming the change, the ABI has warned that this £100 premium loading trigger must be “carefully and thoroughly” worked through.

At present customers face complications should they have a PEMC which could result in them not being able to travel insured.

Other obstacles include exclusions and affordable premiums. 

But although this new regulation might be a welcome step forward for consumers, what does it mean for the insurance industry to implement something like this?

Win

Mike Cranny, director at Create Solutions Ltd, aggred: ”This change is a win-win for the market and for policyholders and reduces the risk of people traveling without cover. Nine months is ample time to make these changes – Changes to scripts, websites and software - if a firm can’t do this there is something wrong. Many brokers don’t sell travel themselves but forward or link to a smaller number of specialist firms.

“I can’t see brokers objecting to this, as it is clearly in the customers’ interest. Many individuals have travel insurance in place via their bankcards, and the banks already have procedures in place to remind customers annually of acceptance criteria.”

Kevin Hancock, chair of the Society of Insurance Broking, agreed: “It makes sense that firms offering retail travel insurance should point consumers they are unable to assist towards a directory of specialist providers who can provide cover to those with pre-existing medical conditions.”

In the FCA’s consultation, respondents broadly agreed with the concept of signposting but most opposed the proposal to signpost all consumers who faced additional costs due to a PEMC as it would capture too many consumers of whom would not benefit from this. 

Kevin McMullan – head of Saga Travel Insurance told Insurance Times that the new rules are a ”great step forward ”to help those with the most serious conditions to be able to access insurance.

“We are awaiting clarification from the FCA about the directory and what the criteria will be to be part of it. We would welcome a review from the FCA after 6 months to assess the practical impact it has had and whether more people been able to access cover” he said.

Saga insures many people with pre-existing medical conditions, including many that other insurers will not cover as well as covering people to travel when they are on waiting lists for many treatments, which is quite rare in the market.

“We understand how challenging it is for people with certain conditions to have to shop around the market to find insurance. For a number of years, we have been signposting the small proportion of customers we cannot cover to specialist insurers and making the rest of the market do the same will make things much easier for many more people, McMullan said.

Access is the core theme in Biba’s manifesto this year, the trade body has long campaigned for signposting for PEMCs.

Whole-hearted support

Staysure has been directly involved in the formulation of regulation and have been part of the working group who have been trying to bring this about.

Its chief executive Julian Kearney told Insurance Times that the travel insurer “supports the regulation wholeheartedly”.

But he added: “As with all regulations, staff will need to be trained to ensure they are knowledgeable about FCA directives. Systems will also need to be compliant and in terms of wider industry disruption, changes can cause short-term disruption, but we believe this is a really positive step for both the consumer and the travel insurance market.

“Overall there will be more transparency in an industry which can be tricky to navigate for consumers.”

Branko Bjelobaba, managing director at consultancy Branko Ltd told Insurance Times that it is a ”good initiative from the FCA” as it enables those requiring travel insurance to be confident when buying it that they are getting something that will work.

”The days of the seller simply relying on exclusions with no thought as to how the policy will or won’t work will be long gone as thought has to be given as to whether the insured has pre-existing conditions. However, a professional will never have sold a policy without fully checking that it will cover the person fully.”

Rigorous criteria

Although Kearney said the main benefit of this regulation will be that there will be less people travelling without adequate travel insurance and subsequently incurring medical bills abroad and a more educated consumer group as this regulation seeks to inform people why specialist medical travel insurance is important.

Staysure said it would be constantly reviewing this to ascertain whether this regulation is actually solving the problem.

Gareth Shaw, head of Money at Which? agreed that the FCA must now apply rigorous criteria to ensure only the companies offering appropriate travel insurance appear on the directory to review its effectiveness.

’Cheap as chips’ policies

Claims trade body ACSO’s executive director Matthew Maxwell Scott also welcomed the changes. ”It’s good news that insurers will provide more clarity and guidance for consumers with pre-existing medical conditions who want to travel but have found it difficult to find appropriate cover,” he told Insurance Times. 

”This has been an issue for a number of years and there have been many horror stories of policyholders being left high and dry abroad because they weren’t aware of the restrictions on cover when they took out a policy.

“Insurers have driven increasing commoditisation in travel insurance and the reputational damage they’ve suffered here is thus largely a problem of the industry’s own making.”

Maxwell Scott added that ACSO would like to see insurers do more to educate consumers about the importance of having appropriate cover for travel, as opposed to being fixated on ”cheap-as-chips policies which are bound to leave many policyholders disappointed and distressed when it comes to making a claim”.

Meanwhile the FCA’s rules will be effective from the 5 November 2020, this means that all firms must amend their travel insurance processes by this date which could prove challenging for some businesses due to the administrative pressure on employees.