City watchdog orders insurers to offer payment holidays from Monday

Insurance customers in financial difficulty may soon get some relief as the City watchdog today asked insurers to grant payment holidays from Monday.  

The Financial Conduct Authority today confirmed a series of temporary measures to help insurance customers who may have seen their incomes hit by the coronavirus crisis.

As of Monday next week, the watchdog will be asking insurance companies to reassess the risk profile of their customers and offer a lower premium if this has changed, for example, if they are using their insured vehicle less.

It will also ask insurers to move policyholders onto more appropriate cover if they qualify, and waive any fees that may come with this.

Insurers will also be asked to move customers onto more appropriate policies and waive fees 

The FCA said firms should consider whether there are other products they can offer which would better meet a customer's needs and revise the cover accordingly.

For example, a motor insurance customer who has used their car very little during the lockdown may no longer need add-ons such as key cover, or they could be moved from fully comprehensive cover to third party fire and theft.

Fees for adjusting a customer's policy would be waived.

This 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.

But if a customer is in trouble and a different policy won't help, the FCA said it expects insurers to offer payment holidays for those paying in installments.

Nearly a quarter of all adults are now struggling

Just under one in four adults said the coronavirus was affecting their household finances according to a poll by the Office for National Statistics published today.

Three quarters of this affected group said they were concerned over a loss of income, while a third said they had needed to use savings to cover living costs.

When considering their futures, four in 10 expected their financial position to get 'a little or a lot worse' over the next 12 months.

Interactive Investor's Myron Jobson said: 'Those in financial constraints may be tempted to use credit cards and take out loans to plug financial holes.

'Even after two emergency rate cuts and historic low interest rates, some forms of debt can still be very expensive so it is important for people to explore all their options.' 

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These 'payment deferrals' will be granted for up to three months, similar to the mortgage holidays that banks and building societies are currently offering homeowners.

If you're a customer, you'll be able to request a payment deferral at any point before 18 August - but the FCA says it will keep the scheme under review in case it needs to be extended.

While the customers will still be insured, the insurance will not be free for those three months and the provider will likely ask for you to pay it back at a later date. 

Where a payment deferral is not considered appropriate, the FCA said that firms should 'promptly offer other ways to provide temporary relief' to the customer. 

This could include accepting reduced payments, rescheduling the term or waiving missed or late payment fees, the watchdog suggested. 

The FCA's Sheldon Mills said: 'Many firms in the insurance industry have already taken some of the actions we are suggesting here to support customers, such as premium reductions, discounts, waiving fees, and payment deferrals.

'The measures confirmed today will provide urgent support to those that need it.'

A spokesman for the Association of British Insurers said: 'We welcome the further clarity provided by the FCA following our feedback on actions the industry has taken. 

'Since the start of the crisis insurers have been working hard to put in measures to help customers who may be facing financial difficulty, as the FCA recognises.

We have also set-up industry wide pledges in motor, home, travel, pet and business interruption insurance to assist customers during this difficult time.'

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