From 18 May 2020, new rules will be coming into place enabling customers to receive either a payment holiday or the option of a three-month policy from their insurance company.
These temporary measures will be implemented by the Financial Conduct Authority (FCA) in an effort to assist those struggling financially due to the coronavirus pandemic. Those customers with an insurance policy or another premium finance product are set to benefit with these announced changes. Some car insurance customers have already started receiving partial refunds without any action taken on their part.
Insurance companies will need to examine existing policies to see if they are still meeting a customer’s needs, or if an alternative product would be more suitable. Alternatively, existing cover can also be revised to meet any changing demands. For example, policy holders may be able to take advantage of cheaper cover or have the option to remove any optional extras without incurring any additional charges if their lifestyle has been altered due to the government implemented lockdown.
Insurance and premium financial product providers will also be required to waive any administration or cancellation fees associated with these changes.
The FCA has said that this could result in lower monthly payments for customers paying in instalments. Those who have paid in full could receive a partial refund once these measures have been applied.
For those customers facing financial difficulties due to the coronavirus pandemic, the FCA has stated that it expects companies to offer customers a payment holiday of up to three months, those struggling will need the necessary financial support. Payment holidays should be able to be requested by customers up to August 18, 2020.
Furthermore, if a payment holiday isn’t the most suitable option, the FCA advises that companies should offer customers the following options: reduced payments, rescheduled policy terms, waive late or missed payment charges or allow a customer to adjust their repayment date without incurring any fees.
Further guidance has been provided to firms advising them that any changes must be communicated clearly and transparently on their websites and mobile applications. A range of helpful solutions should be made available to help those who need it most. Customers that are still facing financial hardship should be encouraged to make contact with the firm to explore what support options are availale.
Sheldon Mills, Interim Executive Director of Strategy and Competition at the FCA, stated: “As with other areas of finance, we have worked quickly to draw up measures to help policyholders in financial difficulty because of coronavirus.”
“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.”
These newly implemented measures will be reviewed in three months’ time.