The Malta Financial Services Authority (MFSA) has called for insurance undertakings to improve their policy wording in order for them to clearer and easier to understand for consumers.

This was also in a bid to reduce issues such as coverage disputes and complaints.

These findings came out from a thematic review on exclusions in policy wordings, together with the product oversight and governance (POG) arrangements, conducted among 22 insurance undertakings operating locally and in various European Union (EU) Member States, on a cross border basis. 50 insurance products were reviewed, encompassing travel, accident and health insurance, as well as household insurance, gadget insurance, and business interruption.

Following this, the MFSA issued a “Dear CEO” letter to insurers to outline its expectations and provide guidance on best practices within this area.

In the letter, the MFSA remarked that insurance undertakings are expected to conduct regular reviews of their products, with the frequency of reviews being aligned with the risk and complexity of the product in question.

However, the authority highlighted that certain insurance undertakings failed to adequately consider the complexity of their products, given that testing was carried out from a legal perspective with a “minimal focus” on client impact.

“The MFSA discourages amending terms and conditions during the policy period, while exclusions or coverage restrictions should be evaluated to maintain a balance between limiting losses and aligning the product with target market needs,” the MFSA stated.

During the thematic review, the authority also identified and endorsed a number of good market practices, including the incorporation of client and distribution research into the POG process, as well as the use of practical examples to explain policy provisions. The MFSA also commended the testing of policy wordings through focus groups and post-claim satisfaction surveys, both having an impact when it comes to assessing service quality and consumer expectations.

“As a regulator of financial services, we want to ensure that insurance products are designed and delivered in a way that meets the needs of consumers, whereby these are not misled or confused by unclear or complex policy wordings,” the MFSA Head of Conduct Supervision Sarah Pulis said.

She added that from the MFSA’s thematic review among insurers, the authority has seen that there is “certainly room for improvement” in this regard.

“The MFSA remains committed to enhancing the insurance market, promoting consumer protection, and fostering a transparent, efficient, and responsible insurance industry in Malta,” Dr Pulis continued.

The full letter can be accessed by clicking here.

The “Dear CEO” letters serve as direct means by which the MFSA communicates with the management of its regulated entities, including Board of Directors and CEOs. These letters typically follow various supervisory interactions, such as thematic reviews and mystery shopping exercises. These letters are published on the MFSA’s website.


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