Coronavirus – New insurance support proposed by FCA
Coronavirus – New insurance support proposed by FCA
New measures to support consumers struggling to make their insurance payments have been announced by the Financial Conduct Authority (FCA).
It comes as a part of a series of guidance that has been introduced by the financial industry regulator and sets out the expectations placed on insurance firms for supporting customers through the coronavirus pandemic. The draft guidance would affect all types of general and protection insurance, from travel and home insurance to vehicle and boiler cover.
In the last few months, other measures introduced by the financial watchdog have included payment freezes on car finance and payday loans and payment holidays on credit cards and mortgages.
Introducing the proposed support last Friday, Chris Woolard, Interim Chief Executive of the FCA said, “The current emergency has altered the value of some insurance products and we believe that insurers should be looking at whether their products still offer value. Many insurers are already taking some kind of action to assist their customers and we want to see a degree of consistency for consumers. Today’s proposed guidance and statement aims to make our expectations clear to all firms in the insurance market and provide future certainty.”Get free advice
What help has been proposed for insurance customers?
The FCA has put forward two clear headline aims to help customers in financial difficulty due to the coronavirus pandemic. They’re hoping the proposed support will “minimise the impact of temporary financial distress”, and “ensure that customers continue to have insurance that meets their demands and needs”.
Insurers would have to help customers who are suffering financial hardship because of the current conditions, as well as looking at cover levels and risk to make sure customers are still getting value for money from their insurance policy during lockdown.
The FCA has asked insurance firms to offer help, not only if a customer gets in touch because they’re struggling to make payments, but also to be proactive if customers have missed payments, even if they haven’t contacted them directly.
This means that insurers could have to weigh up whether to refund premiums or pause monthly payments to make sure customers still get value for money during the lockdown.
Will I be able to take a payment holiday from my insurance?
Payment holidays have already been announced for some financial products, and this new insurance proposal follows suit. The FCA has recommended allowing customers to postpone payments for up to three months without the risk of losing cover.
This option will be available for a full three months after the guidance comes into force (this is expected to be on 13 May). As is the case for most payment holidays that have already been announced, interest charges will apply during the break from paying premiums.
The FCA has also suggested that if customers are still struggling at the end of their insurance payment break, the insurer should “work with the customer to resolve these difficulties in advance of payments being missed.”Get free advice
What else can insurers offer?
The FCA has suggested several measures that firms can introduce to make sure customers have the right level of cover and aren’t paying for any cover they’re not using. These include:
- Reassessing risk profiles – Some insurance risks may be lessened due to the Covid-19 outbreak. For instance, some drivers may not be using their car as much, or be using it for different reasons. In such a case, it would be fair to offer lower premiums on car insurance, or tailor cover to reflect the reduced risk.
- Offering an alternative level of cover –Again, flexibility on cover levels is expected. If, for example, a customer pays extra on their home insurance for boiler cover, but an engineer can’t come out to service their boiler, this payment should be changed.
- Waiving cancellation fees – If the customer still wishes to cancel their insurance, they shouldn’t be liable for any of the usual cancellation fees. For example, some car insurance policies will charge if you cancel mid-term. Customers should also not be penalised by the insurer if they decide they wish to take up another policy in the future.
- Waiving policy change fees – If a customer decides to update their policy in any way, they shouldn’t be liable for any charges or fees to do so. For example, it’s expected that many of those with vehicle insurance will be driving less, so it wouldn’t be fair to charge them for reducing their mileage on policy documents.
What will happen to my insurance when lockdown ends?
The FCA has provided for these changes being made on a short-term basis. In the proposal, they’ve suggested that companies should “take reasonable steps to ensure that the customer’s situation is reassessed at the end of the period to avoid the risk of underinsurance.”
So if, for example, you change your car insurance policy to reflect that you’re driving less, your insurer would have to do what they can to make sure you still have the right level of cover for your needs when lockdown ends.
When will the measures come into force?
The draft guidance is still in the consultation phase, with the consultation coming to a close on Tuesday 5 May. If it gets the go-ahead, it’s hoped that insurers will have the new measures in place by Wednesday 13 May.
If you’ve found yourself in debt and experiencing financial difficulty because of the coronavirus pandemic, it’s essential that you take action. The Creditfix team are offering free, confidential debt advice to anyone who needs it. Give us a call on 0808 253 3282 and start taking control of your finances.Get free advice
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