The UK’s Financial Conduct Authority (FCA) has reaffirmed last month’s guidance to insurance firms regarding the impact of COVID-19 on the value of their insurance products.

The FCA outlined measures in May directing insurance firms to review their products and take action where there has been a fundamental change in risk, or where certain benefits can no longer be provided. It gave the example of public liability insurance for closed businesses.

“The exceptional circumstances of coronavirus may have materially reduced the value,” Interim Executive Director of Strategy and Competition Sheldon Mills said.

Actions such as changing how benefits are delivered, refunding some premiums or suspending monthly payments for a certain period of time should be made within six months.

The FCA made some minor changes, including that insurers should consider whether some policies are providing little or no utility to customers.

The risk profile of customers should be reassessed, as there may be scope to offer customers “materially lower” premiums.

Insurers should also consider whether there are other products they can offer which would better meet customers’ needs and revise the cover accordingly. For example, a motor insurance customer could be moved from fully comprehensive cover to third party fire and theft.

Firms should also waive cancellation and other fees associated with policy changes, and interest rates must be fair.

“These actions could result in a reduction in the monthly premium for customers paying by instalments or a partial refund of the premium for customers who have paid upfront,” the FCA says.

Customers should be able to request a payment deferral at any point until August 18, or firms should promptly offer alternative ways to provide temporary relief.

The measures will be reviewed in the next three months and may be further revised.