The Financial Conduct Authority (FCA) has introduced new rules to help those struggling to meet the cost of their insurance policies.
The FCA, the main financial regulator, has published new rules to protect people with insurance policies during the coronavirus pandemic.
The new rules come into force today (18 May) and apply to both those who pay for their insurance premium in one go, and those who pay for it on a monthly basis.
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Who can get help?
Insurance firms are being urged to identify any customers who may be in financial difficulty as a result of the ongoing situation.
The FCA has said insurers should make note of those policyholders who contact them because they are having difficulty making repayments, who wish to reduce cover, or who have made enquiries about their cover in light of coronavirus.
On top of this, firms should also focus on those who have missed payments during the crisis period, even if they haven’t been in contact with the insurer to discuss their situation.
But the regulator said this should not be viewed as the limit of those who can be helped ‒ insurers can support other customers 'where appropriate should they wish to.'
The help is on offer across all kinds of protection and general insurance policies. That’s a very board range of cover, encompassing everything from car insurance to critical illness cover.
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What help is available?
Once the insurer has identified a struggling customer, the FCA has outlined a number of actions it can take to support them.
These are:
- Re-assess the risk profile of the customer and if necessary lower their premiums, for example, if they have car insurance and are no longer using their car as much'
- Consider whether the customer still needs some of the ‘add-on cover’ they have paid for or whether they could be moved from comprehensive cover to third party, fire and theft'
- Offer payment deferrals to ensure customers do not cancel necessary cover. If customers are determined to cancel the policy, cancellation fees should be waived. Firms should also ensure fair treatment when assessing new premiums for those who cancel and return to the insurer'
- Along with waiving cancellation fees, firms should waive other fees that may normally be incurred when adjusting a customer’s policy'.
The regulator also ordered insurance firms to make clear in their communications, including on their websites and apps, the various options available to policyholders – and urge them to get in contact if they are having financial difficulties as a result of COVID-19.
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What if I pay on a monthly basis?
When you take out an insurance policy, you may be offered the chance to pay for it on a monthly basis, rather than all in one go.
If you do so, you are effectively taking out a form of credit, with interest charged on the sum you are borrowing, meaning the overall cost of your premium is higher.
The FCA has ordered premium finance firms, who offer this credit, to review the interest charged on these premiums to ensure they are fair in the current climate.
Payment deferrals
The regulator emphasised that if amendments to the cover don’t help alleviate some of those payment worries for the policyholder, then it will expect insurers to grant a payment deferral.
In other words, they can make no payments towards their policy for a specified period, without this being recorded as being in arrears.
Importantly, the FCA also makes clear that ‘there is no expectation’ that the insurer makes enquiries with the customer to establish the exact circumstances around why they need this deferral.
That said, they will be entitled to not offer this deferral if they have cause to believe it is not in the customer’s best interests.
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What comes next?
These measures have been brought through quickly and will remain in place for the next three months.
The FCA said that at this point it will review them and revise the guidance if necessary.
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