The 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 Covid-19. The measures come into force on Monday, 18 May 2020 and will be reviewed during the following three months and amended if appropriate in light of the developments in the health emergency situation.
The aim of the guidance is to prompt firms to help qualifying customers, where possible, to:
- Reduce the impact of temporary financial distress.
- Ensure that customers continue to have insurance that meets their demands and needs.
Firms the measures apply to
- 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 in relation to the provision of premium finance
The guidance applies to all non-investment insurance contracts, i.e. general insurance and protection contracts. It does not apply to re-insurance products.
The elements of the guidance that apply to insurers and insurance brokers only apply to eligible complainants as defined in DISP 2.7.3R. This includes natural persons and small business customers.
For premium finance credit agreements, this guidance is not intended to capture lending for business purposes.
The measures 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.
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 1 and 3 months, though firms can go beyond 3 months should they wish to do so, and it is in the customer’s interests.
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.