The Financial Conduct Authority (FCA) has confirmed a series of temporary measures to help customers who hold insurance and premium finance products and who may be in financial difficulty because of coronavirus.
Sheldon Mills, interim executive director of strategy and competition at the FCA, said: “As with other areas of finance, we have worked quickly to draw up measures to help policyholders in financial difficulty because of coronavirus.
“The majority of respondents expressed support for the proposals we published at the start of May. Many firms in the insurance industry have already taken some of the actions we are suggesting here to support customers, such as premium reductions, discounts, waiving fees, and payment deferrals.
“The measures confirmed today will provide urgent support to those that need it.”
These measures will come into force on Monday 18 May 2020. They will be reviewed in the next three months in the light of developments regarding coronavirus and may be revised if appropriate.
Actions firms can take:
Following a short consultation, the targeted measures being implemented require firms to consider what options they can provide to customers including:
- Reassessing the risk profile of customers. This may have changed because of coronavirus and there may be scope to offer customers materially lower premiums.
- Considering whether there are other products they can offer which would better meet the customer’s needs and revise the cover accordingly. For example, a motor insurance customer might no longer need associated add on cover such as key cover or could be moved from fully comprehensive cover to third party fire and theft.
- Waiving cancellation and other fees associated with adjusting customers’ policies.
The FCA says 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 up front.
Where amendments to the insurance cover do not help alleviate the temporary payment difficulties for customers paying their premium in instalments, then the FCA expects firms to grant customers a payment deferral unless it is obviously not in the customer’s interests to do so.
The payment deferral should be granted for a period of between one and three months, though firms can go beyond three months should they wish to do so, and it is in the customer’s interests. Customers should be able to request a payment deferral at any point during the period up to 18 August 2020 while the window for requesting a payment deferral is open.
Where a payment deferral is not considered appropriate, firms should promptly offer other ways to provide temporary relief to the customer. These could potentially include (but not be limited to):
- accepting reduced repayments, or rescheduling the term
- waiving missed or late payment fees
- permitting a customer to amend their repayment date without any cost
The regulator also expects firms to consider reviewing any interest rates associated with instalments to determine whether they are consistent with the obligation to treat customers fairly in the light of the exceptional circumstances arising out of coronavirus.
Firms should make clear in their communications, including on their websites and apps, the different solutions available to customers, and encourage them to make contact if they are experiencing temporary financial difficulties.
Customers who are struggling to afford their insurance or premium finance payments because of the impact of coronavirus should contact their insurer or insurance broker to discuss options.