The Financial Conduct Authority (FCA) is extending measures introduced during the Covid-19 pandemic to now support all insurance customers in financial difficulty whatever the reason.
In its CP23/1 consultation the regulator explained the updated guidance would provide clarity to firms about how they should support all struggling customers, not just those facing problems due to the pandemic.
Before Christmas the FCA revealed it was considering consulting on adapting its insurance Covid guidance for customers in financial difficulty.
In its consultation the regulator said that where firms have identified a customer in financial difficulty they should consider what options can be offered when acting to deliver good outcomes, and provide the customer with good outcomes focussed support that is appropriate given the characteristics of the customer.
It said the aim was to reduce the impact of the financial difficulty experienced on the customer, enable the customer to maintain an appropriate level of insurance that they can afford, and reduce the risk of the customer losing appropriate insurance cover that is important to them.
The regulator emphasised that the level of support needed may be different for customers who have characteristics of vulnerability and firms should take particular care to ensure they act to deliver good outcomes for those customers.
Trigger points and reasonable steps
It is proposing to retain the main trigger point from the Covid guidance, of when a customer contacts the firm because they are in financial difficulty.
This includes where they are having difficulty making their insurance payments, or where they want to reduce or change their cover because of their financial difficulty.
Where customers do not contact their firms, where a firm has identified that a customer is in or likely to be in financial difficulty, firms should take reasonable steps to make the customer aware of, and help them understand, the support available and consider how they will support them and meet their obligations under FCA rules.
The regulator adds that actions firms should consider include:
- reassessing the risk profile of the customer
- considering whether there are other products the firm can offer that would provide appropriate cover at a price the customer can afford and revising the cover accordingly
- adjusting cover to take account of the financial change in the customer’s circumstances
- working with customers to avoid the need to cancel cover that is important to them.
Where the aforementioned actions result in a customer’s policy being adjusted or cancelled, the regulator says firms should consider whether it is appropriate to require the customer to pay all the contractual fees or charges associated with the changes, in circumstances where not relying on these contractual provisions would be needed to provide fair treatment in the customer’s best interests.
Clear, understandable options
The regulator is also proposing that where a firm provides options to a customer it should ensure they have an appropriate level of information about the options, in good time and in an understandable format, to enable the customer to make an informed decision.
Depending on the circumstances, this could include information such as changes to the insurance cover, the effect of the changes, effect on premiums, the risk of being uninsured if they cancel, the duration of any temporary change and any fees associated with the options.
For actions covering a shorter term period, such as less than the remining policy cover period, the regulator is proposing that firms should take reasonable steps to ensure they reassess the customer’s situation when that temporary period comes to an end, to avoid the risk of underinsurance.
As set out in the regulator’s Covid guidance, the FCA suggested firms could do this by introducing an expiration date for any changes to a policy, contacting the customer towards the end of the temporary period and encouraging customers to contact the firm if their circumstances have changed in the interim.
The regulator is proposing to take forward parts of its Covid guidance around signposting, adding that firms should take reasonable steps to make customers aware of, and help them understand the support available in the event they experience financial difficulty, and to allow those customers to easily contact the firm.
This includes, but is not limited to:
- sufficiently prominent information on the firm’s general communications, such as on its website, software applications, telephone recorded messages and other communication
- sufficiently prominent information in communications which could be relevant to potential financial difficulties, such as communications to customers about missed payments, and
- making it easier for customers to contact them when they need help, by considering the different communication needs of customers, such as those not using electronic means.
But the regulator also said it was not proposing to take forward the part of the Covid guidance that sets out that firms should make clear the different available options in their general communications, adding it considers that the options will depend on the circumstances and will not necessarily be the same for all customers in financial difficulty.
‘Help consumers keep the safety net’
Sheldon Mills, executive director, consumers and competition at the FCA, (pictured) said: “Access to insurance is vital, providing peace of mind and security in case things go wrong.
“By extending our guidance we are helping consumers keep that safety net, and ensure they’re properly supported when they claim, even as the cost of living increases.”
The FCA has already urged insurers and brokers to treat their customers fairly by not undervaluing insured items and charging unnecessary add-ons and unfair penalties, such as increased interest for those facing financial difficulty.
The regulator added that its rules also mean firms must make sure the information they provide customers is fair, clear and not misleading, so customers can make informed decisions.