The range of measures proposed by the regulator are effective from 18 May 2020
The FCA has launched a range of temporary measures designed to help insurance and premium finance customers who are in financial difficulty because of the continued Covid-19 pandemic – this includes encouraging insurers to offer reductions in monthly premiums, refunds on fully-paid premiums or payment deferrals.
The measures are affective from 18 May 2020; these will be reviewed in the next three months to ensure they are still relevant as the coronavirus crisis develops.
The FCA is asking insurers to consider:
- Reassessing the risk profile of customers. This may have changed because of the coronavirus outbreak, and there may be scope to offer customers materially lower premiums.
- 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 the customer could be moved from fully comprehensive cover to third party fire and theft.
- Waiving cancellation and other fees associated with adjusting customers’ policies.
- Reviewing interest rates associated with instalments.
These steps could result in insurers reducing monthly premium payments for customers that pay in instalments, or providing a partial refund of premium to those that have paid upfront for their insurance.
Where amendments to coverage do not aid the financial difficulties experienced by those paying in monthly instalments, the FCA expects insurers to grant a payment deferral, unless this would be detrimental. This deferral should be for a period of up to three months, although this can be extended if insurers choose and it is deemed in the customer’s interest.
Customers can request payment deferrals up until 18 August 2020.
If a payment deferral is not an appropriate option, the FCA added that firms should then look to support struggling customers by:
- 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 FCA expects insurers to clearly communicate all of these available options, including on their websites and apps, and actively encourage customers to get in touch if they are encountering temporary financial difficulties linked to the pandemic.
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.”