FCA confirms updated guidance for insurance and premium finance

FCA has confirmed its finalised guidance for insurance and premium finance firms, that applies from 31 October.  The guidance contains minor changes from the consultation version, and supersedes the August guidance, except in respect of payment deferrals that come to an end after 31 October.

The thrust of the guidance is that firms should begin to provide more tailored support to customers in financial difficulties, as they did before the pandemic, but that the support should reflect the uncertainties and challenges the coming months will bring.

The guidance applies to all non-investment contracts and, for insurers and insurance brokers, applies only in relation to eligible complainants.  The premium finance sections apply only where customers pay for their insurance under regulated credit agreements – while noting that firms are expected to treat all customers fairly, and can, if they wish, apply the guidance more widely.

The guidance sets out:

• in relation to insurance, whether a firm should take action such as:
  • reassessing the customer’s risk profile;
  • considering whether there are any products that might better suit the customer’s needs;
  • working with customers to avoid the need to cancel necessary cover; and
  • waiving cancellation and other fees where it takes actin to treat customers fairly;
• how insurance firms should make it clear in all communications, including on websites and apps, what options are available, and should make it as easy as possible for customers to contact them;
• in relation to premium finance, the need to treat customers with forbearance and due consideration, with a view to delivering set outcomes. FCA notes firms may face challenges if they need to recruit additional, inexperienced staff, and supervise them remotely, but they must work to ensure they:
  • treat customers fairly;
  • do not pressurise them into paying off debts too quickly;
  • protect customers from escalating debt once they have entered into a forbearance arrangement with them;
  • recognise vulnerability;
  • have clear procedures and adequately trained staff;
  • give customers time to consider their options; and
  • refer customers to debt advice where appropriate.
• how firms should treat customers at the end of a payment deferral where the customer is still in financial difficulties, including how firms should act when deferred amounts constitute arrears for the purposes of CONC 7;
• how firms should treat customers who find themselves in difficulties because of Covid-19 – focussing on customer engagement before any payments are missed and appropriate forbearance arrangements. The guidance notes the importance of proper training and incentivisation for staff, and the role of the senior manager responsible for governance and oversight of the processes; and
• the resumption of CRA reporting.