FCA confirm coronavirus insurance measures

Insurance firms will be required to reassess the risk profile of customers to see if premiums could be lowered.

Cover could be adjusted and fees associated with these policy changes should be waived to make it easier for customers to alter their policies.

If amendments to policies don't alleviate customers' payment issues then deferral for up to three months should be considered by the insurer.

Credit: Piotr Swat/Shutterstock.com

Formal guidance

The new guidance issued by the Financial Conduct Authority (FCA) on everyday insurance policies follows guidance given by the Government at the beginning of the coronavirus crisis back in March which focused mainly on travel insurance.

Now the FCA has stepped in following a short consultation to require firms to follow a set of clear steps to help customers:

• Insurers should reassess the risk profile of their customers to see if any changes have been made to their profile due to coronavirus
• If a customer's needs have changed, insurers should consider whether there are other insurance products which meet their new needs (i.e. removing additions from policies that are no longer required
• Cancellation and other fees associated with adjusting policies should be waived

It's anticipated such actions could reduce a customer's premiums, either through an immediate refund or a reduction in monthly instalments.

Payment deferrals

If a customer is still in financial difficulty, the FCA makes it clear they expect firms to offer payment deferrals of between one and three months - as long as it's in the customer's interests.

Deferrals may not always be deemed appropriate by insurers, yet they are still required by the FCA to offer temporary financial relief to customers in other ways such as:

• Accepting reduced repayments and/or rescheduling the payment term
• Waiving fees for late or missed payments
• Allowing customers to amend their repayment date without penalty

The FCA has also issued a warning to insurance firms about instalment rates, insisting these should be fair during the exceptional circumstances of the Covid-19 outbreak.

Details on the options open to customers must be displayed on insurance communications including across websites and apps to encourage customers to make contact rather than struggle or sacrifice their policies.

Wider picture

The FCA's guidance to the insurance industry may seem belated, but the other areas they've tackled first arguably cover the larger expenses for households.

For instance, following initial moves by the Government 17 March to offer a three-month payment holiday to customers struggling with mortgage payments, the FCA has run consultations on credit cards, loans, overdrafts, motor finance, payday loans and others before implementing the guidance almost immediately.

Insurance premiums do contribute to a household's finances, however, and they could be seen by customers as something that could be ignored to focus on the everyday costs of living during the coronavirus outbreak.

Yet appropriate motor and home insurance protects the customer from unexpected costs and it's a cornerstone of the UK's risk management systems, not least because the lowest level of motor insurance (third party only) is mandatory for UK drivers.

As well as seeking different products from their insurance companies, customers should also regularly switch their Car Insurance and home insurance products to get the best value for their money.

We've got guides on how to get cheaper car insurance and what home contents cover options there are to offer advice and top tips.