Insurance companies will offer discounts and payment deferrals to customers struggling during the coronavirus crisis under guidance issued by the Financial Conduct Authority (FCA) yesterday.
The temporary measures, which also include waiving cancellation fees and premium reductions, will come into force on Monday 18 May 2020 and will be reviewed within three months.
The FCA said that the risk profile of customers may have changed during the COVID-19 pandemic, and that premiums could be amended accordingly.
A motor insurance customer, for example, 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.
“As with other areas of finance, we have worked quickly to draw up measures to help policyholders in financial difficulty because of coronavirus," said Sheldon Mills, FCA interim executive director of strategy and competition.
“Many firms in the insurance industry have already taken some of the actions we are suggesting here to support customers. The measures will provide urgent support to those that need it.”
If amendments to insurance cover do not alleviate payment difficulties, the FCA expects insurers to offer payment deferrals unless it is obviously not in the customer's interests.
Payment deferrals should be granted for a minimum period of between one and three months, and customers should be able to request a deferral at any point up to 18 August 2020.
If a deferral is not appropriate, the FCA suggests insurers accept reduced repayments, waive missed or late payment fees, or allow customers to amend their repayment date without any cost.
The regulator also expects firms to consider reviewing interest rates associated with instalments, and to make clear in their communications, including on websites and apps, the options available to customers.
“This guidance is helpful for firms and follows several measures, such as premium flexibility options, already announced by life insurers who have been proactive in seeking ways to aid their customers,” said Richard Purcell, insurance innovation lead at Hymans Robertson.
"Delivering value to customers through products is a key area of focus right now, and we are expecting more guidance from the FCA on this topic by the end of the month.”
Author: Chris Seekings