COVID-19 INSURANCE CLAIMS – NEW GUIDANCE FROM THE FINANCIAL CONDUCT AUTHORITY (FCA)
The FCA has now confirmed a series of temporary measures to help customers who hold insurance and premium finance products and who may be in financial difficulty because of Coronavirus.
The new measures, listed below, will come into force on Monday 18th May.
They will be reviewed in the next 3 months in the light of developments regarding Coronavirus and may be revised if appropriate.
Actions that insurance firms can take:
Following a short consultation, the targeted measures being implemented require insurance firms to consider what options they can provide to customers including:
- Reassessing the risk profile of customers. This may have changed because of Coronavirus and there may be scope to offer customers materially lower premiums.
- Considering whether there are other products they can offer which would better meet the customer’s needs and revise the cover accordingly. For example, a motor insurance customer 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.
- Waiving cancellation and other fees associated with adjusting customers’ policies.
These actions could result in a reduction in the monthly premium for customers paying by instalments or a partial refund of the premium for customers who have paid up front. Where amendments to the insurance cover do not help alleviate the temporary payment difficulties for customers paying their premium in instalments, then the FCA expects firms to grant customers a payment deferral unless it is obviously not in the customer’s interests to do so.
The payment deferral should be granted for a period of between 1 and 3 months, though firms can go beyond 3 months should they wish to do so, and it is in the customer’s interests. Customers should be able to request a payment deferral at any point during the period up to 18th August 2020 while the window for requesting a payment deferral is open.
Where a payment deferral is not considered appropriate, insurance firms should promptly offer other ways to provide temporary relief to the customer. These could potentially include (but not be limited to):
- Accepting reduced repayments, or rescheduling the term
- Waiving missed or late payment fees
- Permitting a customer to amend their repayment date without any cost
The FCA also expects insurance firms to consider reviewing any interest rates associated with instalments to determine whether they are consistent with the obligation to treat customers fairly in the light of the exceptional circumstances arising out of Coronavirus. Insurance firms should make clear in their communications, including on their websites and apps, the different solutions available to customers, and encourage them to make contact if they are experiencing temporary financial difficulties.
We very strongly recommend that customers who are struggling to afford their insurance or premium finance payments because of the impact of Coronavirus should contact their insurer or insurance broker to discuss options. It is important people don’t leave themselves uninsured and should not hesitate to contact their insurer – if necessary quoting these new FCA instructions.
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We hope you have found this briefing useful, and we will of course issue further advice and guidance Bulletins as the Covid-19 situation develops.