The Financial Conduct Authority (FCA) is concerned that as pressure mounts on household budgets some customers may cut-back on the insurance they need, leaving them without protection.
The government has announced further support for consumers and businesses for energy costs and in the September fiscal event, including a two-year energy-price guarantee for households. While this will help tackle the pressure on household budgets, some people may still consider cutting back on insurance cover.
The FCA is taking action to support households, by writing to insurance industry CEOs to make sure their customers are protected from unnecessary products or add-ons and unfair penalties. Where poor practise is found, the FCA will quickly intervene to protect customers from harm.
Customers, including businesses, in financial difficulty are also more likely to need to pay for their insurance monthly through premium finance. They may also be the most affected by general interest rate rises and have a higher likelihood of not being able to make a payment.
If customers face increasing difficulty paying bills or repaying debts, the impact on them is unlikely to be purely financial. Consumers will be more likely to face pressures on their physical and mental health, which in turn could worsen the impact of their financial difficulties.
Firms can help customers in financial difficulty by:
- Reassessing customers’ needs
- Considering whether there are other products that better meet the customer’s needs
- Providing clear information to consumers about the additional cost of premium finance
- Working with customers to avoid the need to cancel necessary cover
- Waiving fees associated with adjusting a customer’s policy in line with the reassessments
- Considering whether cancellation fees should be removed for customers in financial difficulty
Sheldon Mills, Executive Director, Consumers and Competition at the FCA, said: “Customers who are struggling with their finances should contact their providers as soon as possible. We encourage customers to continue to shop around to find the best deal.
“Firms should not unfairly penalise them for any payment difficulties but instead work with them to find solutions.
“We have a thriving and efficient insurance sector, and we want people getting the cover they need at a cost they can afford so both business and customers benefit.”
Firms must continue to provide clear information when customers renew their policy to help them decide whether they want to go ahead or shop around for a better deal.
Since the cost of living squeeze began, the FCA has reminded 3,500 lenders how it expects them to support borrowers who get into financial difficulty.
Although the FCA does not yet regulate Buy Now Pay Later (BNPL) products, the FCA met unauthorised BNPL providers to encourage these firms to provide their customers with an appropriate level of care and support.
The FCA has also told banks to improve the way they treat struggling small business owners when collecting and recovering debts and warned firms about unsuitable credit promotions. As a result of the FCA’s work nearly 4,000 adverts have been amended or withdrawn, helping to protect consumers from being misled.