Extension of Temporary Measures for Insurance Firms: Treating Customers Fairly
The Financial Conduct Authority announced on Friday its proposal to extend a series of temporary measures to help insurance customers – including those who pay via instalments - who are in financial difficulty due to coronavirus.
In effect, the measures ask insurers to consider what options they can offer customers to help reduce the impact of financial distress caused by the pandemic, and ensure that customers can continue to have insurance that meets their needs.
Where a customer in potential financial difficulties has been identified, then the firm must consider which options it can offer to help the customer. Potential options may include deferral of payment. Where payment deferral is not in the customer’s best interest, there are a number of alternative options such as re-assessing the risk profile of the customer to see whether they could be offered a lower premium. If there are other products that might better meet the needs or the customer – given that their needs may have changed during this period – switching might also help the customer.
Where customers decide that it is in their interest to cancel their policy, firms should consider waiving any cancellation fees, if it needs to do this to ensure fair treatment of the customer. And where actions taken by the firm result in a reduction of the premium for customers who have paid up front, a partial refund may need to be offered.
The FCA have also confirmed that they do not expect premiums to increase as a result of any assessment, and that increases would be unlikely to meet regulator expectations.
The guidance makes clear that the FCA expect firms to act decisively, particularly where the customer contacts the firm because they are having difficulty meeting repayments, or if they ask to reduce cover. Proactive identification of customers who may be affected is also expected – where customers have missed payments during the crisis period, firms should consider appropriate actions for these customers, even where they have not contacted the firm.
For those customers paying by premium finance, the guidance doesn’t apply where the customer was in financial difficulty prior to coronavirus – in this case, the forbearance rules and guidance in CONC continue to apply.
Where a payment deferral has been granted, payment should not be sought from the customer until the end of that deferral period, and the FCA has made clear that firms within a chain should work together to make sure that customers in this position are treated fairly. Firms should also proactively contact customers coming to the end of a deferral period to understand whether they will be able to resume payments at the end of the deferral period. And where customers at the end of a deferral period are in circumstances that would entitle them to forbearance measures under CONC, the firm should take appropriate measures – and must take individual customer circumstances into account, blanket solutions for all customers requiring further support may risk breaching Principle 6.
Above all, firms must be mindful of the aim to ensure that customers continue to have insurance that meets their needs.
Now, more than ever, the FCA is making clear that it intends to take breaches of the rules relating to the identification, monitoring and appropriate action for customers in actual or potential financial difficulties very seriously. The rules within the Consumer Credit Sourcebook (CONC) are clear – firms must monitor customer repayment records and take appropriate action where there are signs of actual or possible repayment difficulties.
Staff must be able to actively identify when customers are at risk of financial difficulty, or are in actual financial difficulties, and this is not always straightforward. The FCA’s requirement to proactively identify such customers becomes difficult where contact is quick or the customer isn’t keen on sharing their concerns or what they feel is very personal information.
So it is crucial that staff are adequately trained to pick up on key indicators that someone’s circumstances have changed. This is all the more essential during the pandemic, where those who may not previously have been candidates for financial difficulties – such as those with high incomes but lower savings – experience a sudden change of circumstances, through the loss of income.
Regular, engaging training on identification and support of customers in financial difficulties is hard to find during this working from home period. Our game-based learning platform offers an accessible platform that staff can use to update their skills and knowledge during breaks at work, or during the time they’d normally be commuting.
To find out more about the benefits of a game-based approach to learning and how to train a remote workforce, join our 45 minute webinar on 18 August 2020 at 3pm BST.