Insurance and premium finance customers that are in financial distress as a consequence of coronavirus may be able to get extra support to pay what they owe, under new guidance from the Financial Conduct Authority (FCA).
The guidance – which came into effect on 1 November – sets out how firms should provide tailored support to consumers who have already had a payment deferral and those newly in financial difficulty due to changed circumstances relating to coronavirus.
It supplements guidance published in May and updated in August 2020, which was designed to enable firms to act quickly to deliver immediate and temporary support to their customers during the pandemic and help them to get back on their feet.
Here, Which? looks at the guidance in more detail and explains how you can get help if you’re eligible.
- Are you considering asking for a payment holiday, or have you applied for one in the past? If you’d like to tell us about your experience, please email email@example.com.
What help could I get under the FCA’s guidance?
The guidance sets out expectations of how your insurer should support you during the coronavirus crisis.
The FCA says the support needs to reflect the ‘uncertainties and challenges’ that many customers will face in the coming months, possibly for some time to come.
Under the guidance your insurer may:
- Reassess your risk profile to see whether it has changed because of coronavirus;
- Consider whether other products can be offered which better meet your needs and revise the cover accordingly;
- Work with you to avoid the need to cancel necessary cover.
These actions could result in a reduction in monthly premiums for customers paying by instalments, the FCA says. Its guidance also notes that for customers who have paid upfront, this could result in a partial refund of the premium.
You could also be offered a range of other forbearance options such as suspending, reducing, waiving or cancelling interest or charges.
Firms may be able to offer long-term help to cover the entirety of your cover period. If short-term help is offered, your insurer should reassess your situation when that temporary period comes to an end to ‘avoid the risk of underinsurance’, the FCA says.
The guidance states firms should make the different options available to you clear in their communications, including on their websites and apps, and encourage you to make contact if you are experiencing financial difficulties.
- Find out more: how to play the insurance claims game
Am I eligible for help with my insurance costs?
The FCA says many peoples’ finances are expected to recover and those who have deferred payment of their insurance premiums and can afford to resume full repayments should do so.
However, some people will continue to be affected, or will be newly affected by circumstances relating to coronavirus, and will continue to need help.
You may be eligible for help if you hold insurance and/or are in a regulated premium finance arrangement – a credit agreement specifically for the purposes of enabling a customer’s payment of an insurance premium in instalments.
There are other arrangements available to customers which enable paying an insurance premium in instalments, which do not involve the provision of premium finance which are not covered by the guidance. These include where credit is provided under an exempt credit agreement, and where an insurer and consumer enter into an arrangement in which the consumer pays for their insurance on a pay-as-you-go basis.
Firms are not expected to proactively contact all consumers who miss payments. Though, they should still consider whether it’s appropriate to contact a customer to offer support if they have missed a payment. They should also consider what steps they should take where a customer could be vulnerable.
- Find out more: check the latest financial help available on our coronavirus news and advice page
How can I get help with my premium if I’m struggling to pay?
You will need to contact the firm through which you arranged your insurance or the finance for the premiums to discuss your options.
If you have missed payments during the crisis, or are already on a payment holiday which is coming to an end, the firm should have gotten in touch with you, but don’t wait for a call if they haven’t – the sooner you call for help the better.
Firms should follow a process to arrive at an appropriate and fair way of treating each customer. If you hold more than one policy with a firm, it should consider treating them all in the same way.
Are there any downsides?
The FCA says it doesn’t expect firms to take any action that leads to an increase in premiums, which would be ‘very unlikely to meet our expectations’.
But it’s still important to take time to understand the implications of any help you’re offered, like what it’ll mean for your payments in the future, just in case.
Where firms offer a range of options to customers, they should be clear about the different implications of these, including in relation to the total cost of credit, the watchdog says.
As long as you stick to the agreement, an insurance payment holiday won’t affect your credit score so it is far better to arrange one than simply stop paying.
- Find out more: how to check your credit score for free
Coronavirus news and advice from Which?
If you’re struggling financially during the crisis, check out our coronavirus news and advice page.
For more help on coronavirus and insurance, the following stories may be helpful to you:
- Coronavirus travel insurance: who will cover me?
- Will your car insurance premium go up if you lose your job?
- How to play the insurance claims game
If your finances are affecting your mental wellbeing during the pandemic, check out our money and mental health special podcast episode which includes practical tips and advice to help you during these difficult times.
- Find out more: read our range of insurance guides to help you compare policies.