The FCA has updated its guidance for firms operating in the insurance and premium finance markets.
These firms include:
- 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The draft guidance is similar to the temporary measures the FCA introduced in May.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.