The regulator is aiming to solidify its stated support for consumers struggling with the cost of living crisis, says executive director for consumers and competition
The FCA has today (11 January 2022) opened a consultation on proposed updates to guidance to support insurance customers in financial difficulty.
Introduced during the Covid-19 pandemic (November 2020), the current guidance sets out expectations for insurers and premium finance firms to provide tailored support to struggling customers via, for example, payment deferrals or consulting with customers on more affordable options.
The regulator is consulting with the industry on whether to replace the insurance aspects of the Covid-19 guidance with guidance extended to apply to all customers in financial difficulty, rather than just those who were in financial difficulty because of the pandemic.
An FCA statement said: “As part of the FCA’s ongoing work to help protect customers during the current cost of living squeeze, this will provide clarity to firms about how they should support all struggling customers, not just those facing problems due to the pandemic.”
Under the new guidance, insurers would be required to consider whether a different product was more suitable for customers facing financial difficulties and whether they should waive cancellation and other fees associated with adjusting customers’ policies.
The consultation on these updates will run until 11 March 2023, when the regulator will consider the responses before implementing any changes.
Safety net
Sheldon Mills, executive director for consumers and competition at the regulator, said: “Access to insurance is vital, providing peace of mind and security in case things go wrong.
“By extending our guidance, we are helping customers keep that safety net and ensure they’re properly supported when they claim, even as the cost of living increases.”
The FCA has been keen to emphasise the importance of insurance firms handling claims fairly and promptly and making sure customers have access to fair value products.
In a Dear CEO letter sent to insurance firms in September 2022, the FCA said: “Given the increased risks around underinsurance and the increased prevalence of ‘basic’ or ‘essential’ products, it is important that firms ensure that when proposing contacts of insurance they meet customer’s demands and needs and that appropriate information is given to customers about products.”
Meat on the bones
Sarah Brook, a senior associate with law firm CMS, said: “The proposed guidance puts some meat on the bones of the FCA’s warnings that the insurance sector needs to take steps to protect customers impacted by the cost of living crisis.
“The consultation comes at a time when the market is already grappling with the pressures of meeting the Consumer Duty implementation deadline in July.
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“As finalised guidance is also due in July, firms will need to move swiftly to factor it into their Consumer Duty projects.”
Branko Bjelobaba, principal at financial compliance consultancy Branko, added: “This is a timely publication from the FCA now that we have moved on from Covid-19 to a rather more all-embracing cost of living crisis and I would be appalled if any insurers, brokers or premium finance providers were exploiting customers right now.
“Financial difficulties will be experienced by many and this is not the time to exploit these vulnerabilities and while the FCA is to be applauded, they really need to bottom out what we already have in place, which is a core part of the incoming Consumer Duty.”
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