Financial difficulty for insurance and premium finance firms

The FCA has updated its guidance for firms operating in the insurance and premium finance markets.

These firms include:

  • Insurers;
  • Insurance intermediaries (including appointed representatives);
  • Premium finance lenders that provide credit to fund the payment of insurance premiums in instalments;
  • Premium finance brokers that carry on regulated activities relating to credit granted for the purposes of financing insurance premiums in instalments;
  • Debt collectors;
  • Other firms that may be involved in insurance arrangements and/or the provision of premium finance.

The draft guidance is similar to the temporary measures the FCA introduced in May. Our original newsletter article introducing the temporary May changes can be found here.

If approved, the guidance will come into force on 31st October. 

Key Point Summary
While the main stakeholders are insurers and the providers of premium finance, intermediaries need to be aware of the content so they can support customers and guide them through times of financial difficulty.

For insurance arrangements, this includes measures such as:

  • Re-assessing the risk profile of the customer to see whether they could be offered lower monthly payments.
  • Considering whether other products can be offered which better meet the customer’s needs.
  • Providing help to avoid the need to cancel necessary cover.

Where customers hold premium finance credit regulated agreements, help could include:

  • Allowing the customer to make no or reduced payments for a specified period.
  • Suspending, reducing, waiving or cancelling any further interest or charges.
  • Allowing the customer a reasonable time and opportunity to repay the debt, including by deferment of payment of arrears.

The measures in this guidance differ from the measures in the earlier guidance, for example:

  • Firms are not expected to proactively contact all customers who miss payments. However, firms should still consider whether it’s appropriate to contact a customer to offer support if they have missed a payment.
  • Firms should also consider what steps they should take where a customer could be vulnerable.
  • The specific expectations on forbearance measures in the premium finance sections of the guidance have been limited to regulated credit agreements. The expectations will not apply in relation to non-regulated instalment payment arrangements (such as pay as you go arrangements), although firms are not prevented from applying the measures set out in the guidance to such arrangements.

Firms should make the different options available to customers clear in their communications, including on their websites and apps, and encourage customers to make contact if they are experiencing financial difficulties.

Important Note: ATEB news is intended to provide general information ONLY. The content, including any views expressed or guidance provided, does not replace the need to comply fully with FCA Rules and Guidance. Unless you have discussed news article content with ATEB, and specifically how it relates to your circumstances, then ATEB disclaims all liability and responsibility and actions arising from any reliance placed upon it. For the avoidance of doubt therefore, any reliance you place on such information without our consultation is at your own risk.

ATEB Compliance offers compliance and regulatory advice.

ATEB Suitability provides report writing software for the financial services market.

Our View

For information.

We expect the draft guidance to be implemented in full.

Action Required By You

  • Ensure key staff are familiar with the draft guidance document content;
  • Ensure processes are  amended where required;
  • Contact your usual ATEB Consultant for further assistance or contact ATEB here.
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About the Author

Technical Manager - Often referred to as the Oracle or the Sage, Alistair has a wealth of financial services experience. He is our go-to Technical Manager and enjoys nothing more than a complicated conundrum. Feel free to test his renowned knowledge by getting in touch.

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