The Financial Conduct Authority (FCA) has confirmed a series of measures aimed at assisting insurance customers who may be suffering financial difficulties as a result of the Coronavirus (Covid-19) pandemic. The move follows an ultra-short consultation announced on 1 May 2020 which BIBA and its members participated in.
Feedback Statement FS20/5: Coronavirus and customers in temporary financial difficulty: guidance for insurance and premium finance firms sets out comments received during the consultation. Members may access the final rules and guidance by clicking here.
The targeted measures being implemented require 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.
The finalised rules and guidance are subject to a small number of changes. These include amendments to:
- Confirm that the sections of the guidance relating to premium finance are not intended to capture lending for business purposes. This is the case even when the lending for business purposes is within scope of the regulated credit regime, such as non-exempt lending to a sole trader.
- clarify that firms do not have to consider an interest rate revision as a prerequisite to offering a payment deferral.
- provide flexibility for firms to offer a payment deferral period of between one and three months.
The measures will come into force on Monday 18 May 2020, just a few days later than originally intended. The FCA will review the measures within three months in the light of developments regarding the Coronavirus and may be revised if appropriate.
BIBA members’ compliance and regulation queries should be directed to: [email protected].