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The Financial Conduct Authority (FCA) has brought forth more guidelines for businesses to follow for struggling insurance customers.
If insurance customers are still facing financial difficulties due to coronavirus crisis challenges after 31 October 2020, they will have continued support from firms, according to Insurance Business UK.
The FCA’s first measures were announced in May. Firms have been expected to provide custom support to consumers while they face financial struggles even if they have already used a payment referral plan.
According to Insurance Business UK, the FCA measures include:
- Customers of “premium finance credit regulated agreements” will be allowed to forgo payments or make reduced payments for a specified time;
- Waiving or reducing interest or charges when possible; and
- Customers will have a reasonable amount of time to repay debt.
The new FCA measures have added an additional guideline, stating financial firms are not expected to actively reach out to customers to collect missed payments, Insurance Business UK reported.
The financial watchdog continues to reiterate the importance of “tailored support” for struggling insurance customers.
Insurance firms are being held accountable for the following, according to the FCA:
- Re-assessing where customers are financially to see if they are eligible to pay lower payments;
- Finding other products that will better suit a customer during this time; and
- Providing assistance to customers to help them avoid having to cancel important insurance coverage.
According to the FCA, firms expected to follow the new guidelines are:
- Insurance companies
- Insurance brokers or representatives
- Premium finance lenders
- Premium finance brokers
- Debt-collection agencies
- Other insurance-related firms
The FCA’s new guidance only applies to branches of the insurance market that are governed by the watchdog, but all firms will be advised to consider following the guidelines to help support customers, FT Adviser reported.
Some insurance firms have already begun following the FCA’s measures to support customers.
“Some have been doing it [all] to some degree, some are just deferring payments to later,” Cura Financial services co-founder Kathryn Knowles told FT Adviser.
“It has been a bit ad-hoc, and it is a tough one but some insurers have been offering payment holidays,” Knowles said. “Some are doing it for a few months, or for a month at a time and then reviewing it. Others are allowing a payment holiday but then requesting customers to pay back the missed premiums.”
The FCA continues to advise firms to be clear and concise with customers.
Customers should know they can contact firms as soon as they are facing any kind of financial challenges. Insurance customers who are facing financial difficulty at this time should stay in contact with firms to work out an arrangement. Those who can make payments should make them.
“It is difficult to prioritise which bills get paid when you are on limited income and even harder when you only get benefits,” Terry Mason at Housing Hand told FT Adviser. “You put insurance policies in place for a reason but they are normally the first to not get paid when money is tight.
Clients should contact the insurer to see if you can have a payment holiday. The worst thing you can do is just not pay them.”
Right now, insurance firms are flexible and are mandated to assist where help can be given.
The FCA’s proposal has been created to protect customers facing financial and health-related issues. The new guidance will go into effect on 1 November 2020.
The FCA is welcoming comments about the new guidance from stakeholders. Send comments to Sean.Cafferky@fca.org.uk and Ruby.Adesuyi@fca.org.uk by 5 p.m. 20 October 2020.
What are your thoughts about the FCA’s continued guidance to support struggling consumers? Share your thoughts in the comments section.
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