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Cost of Living – Latest FCA Dear CEO letter

As the sustained increase in the cost of living continues to bite, the FCA have published a Dear CEO letter to insurance firms. The letter acknowledges the difficulties faced by firms and consumers alike but sets out its expectations of insurers over the coming months, particularly around customers with vulnerable characteristics and customers in financial difficulty.


The FCA are pre-empting the possibility that to make savings, some consumers may look to cut back on their insurance cover. The Regulator is asking insurance firms to be proactive and make sure that customers are protected from “unnecessary products or add-ons or unfair penalties.” The FCA also points out that the most affected will be lower-income customers, who are most likely to pay for their insurance on a monthly basis through premium finance – and are therefore likely to be most affected by general interest rate rises.


The letter is directed at insurers but the principles of support for those struggling with increasing costs and interest rate rises will apply across the board, with the Financial Conduct Authority keeping a keen eye on the support offered to those in financial difficulty – a category that is set to rise exponentially.

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The conditions of the coming winter mean that there will be more UK customers in financial difficulty than ever before – certainly since the introduction of financial regulation as we know it today. In the coming months, ensuring that enough experienced staff are available to help with the likely rise in customers experiencing difficulties – as well as other resources – could make all the difference to customer solvency and regulatory compliance.


The Dear CEO letter highlights the cyclical nature of the impact of the winter squeeze. Customers who will face more and more difficulty in keeping up with their payments are also more likely to face pressures on their physical and mental health, which “in turn could worsen the impact of their financial difficulties.”


The Regulator suggests that firms help customers in financial difficulty through:

  • 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

Bearing in mind the findings of the FCA’s recent research report on those in financial difficulties and contact between customer and provider, all firms should be preparing for an increase in the number of customers that will meet the definition of financial difficulties. The FCA will expect that firms identify these customers and offer them appropriate support.


A significant chunk of the work is in enabling contact. The research report - undertaken by Yonder Consulting – found a number of factors that meant a customer was more likely to proactively engage with lenders; those in more complex financial situations, older borrowers, and those who believed that there would be no impact on their credit file from speaking to a lender were more likely to have made contact.


This information gives a good head start to a project to encourage customers to make contact themselves – freeing some resources from outgoing communications. Ensuring that communications to customers make clear any impact on the credit file and when that would happen will help here, for example that contact itself won’t be reflected on the credit file but missed payments and any agreements would.


Resources must be considered before the winter hits. Can call centres and other contact options reasonably deal with any increase in the number of customers contacting them about their financial circumstances? The FCA has itself published a webpage designed to directly help consumers; they suggest that consumers contact firms directly to discuss tailored support.


With the FCA’s focus on the increasing impact to the financial wellbeing of a significant proportion of UK adults, staff must be clear on the identification and support of customers in financial difficulties. Our dedicated Financial Difficulties course takes learners through techniques that have been tried and tested, covers questioning skills, empathy and active listening, what to say, when to say it, and how to support customers.


Priced at just £20 per user, the courses are accessible at the delegate’s convenience and provide a certificate upon successful completion, allowing firms to track and record each user’s progress.


For large groups, we can offer several corporate packages.



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