The Financial Conduct Authority (FCA) has introduced a series of temporary measures seeking to ease the financial burden insurance customers are facing during lockdown.
The regulator said that those who hold insurance and premium financial products may find it hard to make their payments and that insurers should consider providing greater flexibility to those affected.
After a short consultation, the FCA said that companies should:
- Reassess the risk profile of customers. This may have changed because of coronavirus and there may be scope to offer customers materially lower premiums;
- Consider whether there are other products they can offer, which would better meet the customer’s needs and revise the cover accordingly; and,
- Waive cancellation and other fees associated with adjusting customers’ policies.
Going the extra mile
The watchdog said these actions could result in lower monthly premiums for those paying by instalment or a partial refund for clients who paid upfront.
But if changing insurance cover will not help the customers with their payment difficulties, then the FCA expects companies to grant policyholders a payment deferral unless it is not in the their best interests.
Deferrals should be granted for a period ranging between one and three months, but insurance firms are allowed to grant a longer extension if they wish, and if it will help the client.
If an extension is not considered appropriate, however, businesses should offer alternative solutions; such as accepting reduced payments or rescheduling the term; waiving missed or late payment fees; or allowing a policyholder to change their repayment date without any extra costs.
The FCA said it also expects firms to review any interest rates associated with instalments to make sure they are consistent with its principle of treating customers fairly.
All these solutions should be communicated to clients via any means possible, including on websites and apps.
Already on the case
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,” Mills added.
They will come into force on 18 May 2020 and will be reviewed in the following three months according to the developments of the covid-19 pandemic; and customers can ask for a payment deferral up until 18 August 2020.
