In November 2020, the FCA introduced guidance for insurance and premium finance firms to support customers in financial difficulty caused by the coronavirus pandemic. It is now consulting on replacing the insurance side of that guidance to extend its scope to all customers in financial difficulty, whatever the cause. The guidance for premium finance firms is also set to change under a separate consultation. Charlotte Gregory and Oliver Wannell outline the details of the consultation below.
UPDATE: Following publication of this article, the FCA has published its finalised guidance for the insurance industry in support of customers in financial difficulty. Our Financial Services Regulatory team take a look at what the guidance says in an updated article, available here.
The FCA intends to give firms clearer expectations on supporting customers in financial difficulty by setting out trigger points at which they should take action to assist customers. For example, where a customer requests to cancel insurance cover that is important to them, this should trigger the firm to consider whether that customer might be experiencing financial difficulty. The proposals also set out expectations on the types of action that firms should consider taking with customers to avoid the need to cancel important cover. These include:
These expectations are intended to help firms meet their obligations under the Customer’s Best Interests rule and the incoming Consumer Duty, in particular Principle 12: acting to deliver good outcomes for retail customers.
Ensuring that customers maintain insurance cover that they need is of particular concern to the FCA. The 2022 Financial Lives Survey found that 1 in 4 UK adults has low financial resilience, and that 60% of UK struggle to keep up with their bills. The aims of the proposed guidance are, therefore, to reduce the impact of financial difficulty on customers, help them maintain an appropriate and affordable level of insurance and reduce the risk of customers losing insurance cover that is important to them.
The FCA is inviting comments on its proposals and draft amendments to ICOBS until 31 March 2023. If implemented, the FCA plans to bring the guidance into force by 31 July 2023.
If you have any questions, please get in touch with our Financial Services Regulation team and read more here.