The FCA have released guidance for insurers to help those whose capacity for payments has been altered by the COVID-19 pandemic.
On 1 May 2020, the Financial Conduct Authority (FCA) published guidance for premium finance and insurance firms regarding the fair treatment of customers experiencing temporary financial difficulty because of the global health crisis in which we find ourselves.
In their own words, the FCA ‘wanted to act quickly to protect consumers in these difficult times.’ Their guidelines came into effect on Monday, 18 May, and explain to firms the circumstances under which they would be obligated to offer payment help, refunds or policy adjustments to general and protection insurance customers.
What are the FCA recommending?
The FCA’s amendments can be summarised thus:
- providing flexibility for firms to offer a payment deferral period of one–three months
- clarifying that firms aren’t required to consider a revision of interest rates as a prerequisite to offering payment deferral
- outlining how their guidance applies to different kinds of customer and insurance contracts, including car insurance, home insurance and business insurance to name a few
Insurers need not necessarily offer this support automatically; it is the customer’s prerogative to contact their provider to request help. That being said, the way you pay for your insurance may affect the type of support for which you are eligible.
What insurance help could be available if you’re struggling financially?
Insurers can help in a variety of ways:
- reviewing your needs to see if they can reduce premiums
- payment deferrals
- removing administration and cancellation fees
- not charging interest incurred for missed payments
- offering extended cooling-off periods
- giving you back part of the premium if you paid upfront
These may vary by provider, so the best thing you can do in the first instance is contact your insurance provider.
How can I apply for an insurance payment deferral?
From 18 May until the 18 August 2020, insurance customers can request a payment deferral. You can do this by contacting your insurance provider.
What if my insurer doesn’t offer me a payment deferral?
Payment deferrals are ultimately the prerogative of the insurer, and their stance may depend on your circumstances. If your insurance provider doesn’t think that a payment deferral is suitable for your individual circumstances, they may offer you other support:
- reducing your payments
- writing off missed payments or fees
- allowing customers to amend their repayment date without any associated charges
If you have life insurance and your provider isn’t offering payment holidays, it’s probably worthwhile to continue paying—even if you’re tempted to put your payments on hold in order to cut costs.
You could risk losing your cover, and you may struggle to find the same level of protection if you then had to begin another policy at a later date. The FCA can provide you with more information.
More support for refunds and premium cuts is coming
Some providers are now offering reduced premiums for decreased cover or payment holidays whilst maintaining cover. However, they generally haven’t been proactive in publicising this move, and have hitherto offered assistance only upon being contacted by a customer.
But the FCA’s proposed guidelines should make it far clearer whether your insurer could be offering you more help or providing you with a refund. Furthermore, insurers are obligated to contact policyholders who have failed to pay so that together they may work out how to maintain essential cover.
What other coronavirus support is available?
It’s well worth checking out your eligibility for the coronavirus mortgage payment holiday if you haven’t already taken advantage of this, as well as the Coronavirus Business Interruption Loan Scheme, Bounce Back Loans Scheme and other coronavirus business support if you’re a business owner.
Make sure you still have the right insurance
We all need to save money during lockdown, so the FCA’s guidelines were a welcome relief for many. They are due for review within three months of its inauguration, in order to account for developments surrounding the COVID-19 pandemic and reevaluate whether they are still required.
For consumers, however, the advice is relatively straightforward: regardless of the type of insurance you have taken out, your lender may be able to help you cut the cost of your insurance in order to make your premiums affordable, or defer payments for one–three months.