The FCA has proposed additional guidance to help insurance and premium finance customers who are in financial difficulties because of the impact of the Covid-19 pandemic.
Covid-19 has changed all our lives, but some people face financial distress because of the health and economic consequences of the virus. Customer vulnerability has been exacerbated during the pandemic, so the fair treatment of customers and the reduction of consumer harm are paramount during these difficult times.
The new guidance, which follows the temporary measures already put in place since May, sets out the regulator’s expectations of firms in their dealings with those in financial difficulties arising because of the Covid-19 pandemic. It is worth noting that the regulator does not intend that the guidance should have applicability in circumstances unrelated to Covid-19.
The guidance aims to help affected customers by prompting firms to:
- reduce the impact of financial distress
- ensure that customers continue to have insurance that meets their needs
For insurance arrangements, measures proposed include:
- Re-assessing the risk profile of the consumer to see whether they could be offered lower monthly payments. For instance, if a motor insurance customer’s use of their car has changed (e.g. if they are no longer using it for business purposes or are perhaps not using it at all), the risk can be reassessed and the customer may possibly be offered a lower premium. However, firms should also be mindful of the changing demands and needs of clients and that when the customer’s circumstances change, it is important that the customer is not left underinsured.
- Considering whether other products can be offered which better meet the consumer’s needs.
- Providing help to avoid the need to cancel necessary cover.
If a customer holds a premium finance regulated agreement, firms could provide help by:
- 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.
There are some differences in the new guidance from the measures included in the FCA’s earlier guidance. For instance, firms will not be expected to proactively contact all consumer who miss payments. However, firms may consider contacting clients, where appropriate, to provide support if they have missed a payment. Firms should also consider their approach to dealing with vulnerable customers.
Websites and other communications sent from firms should also clearly set out the options available to customers if they are experiencing financial difficulties.
If confirmed, the additional guidance will take effect on 1 November 2020. It will apply to insurers, insurance brokers (and other insurance intermediaries), appointed representatives, premium finance firms and debt collectors.
If you have any questions, please contact your RWA Business Manager.