Policyholders will be assessed for eligibility on a case by case basis.
Those offered the payment holiday will not need to repay the missed premiums and cover will remain in place during the payment break.
But many other major insurers have yet to take decisive action to help policyholders affected by the outbreak who need a holiday from paying their premiums.
No industry-wide solution
Mortgage Solutions asked 11 insurance providers if they planned to offer payment holidays to policyholders who were facing financial hardship because of the spread of Covid-19.
While stressing that they were supporting vulnerable policy holders during the most challenging time they may ever face, only LV said it would freeze premiums over the coming months, while leaving cover in place, to give their customers breathing space.
Furthermore, an industrywide response is not likely to be issued soon as the Association of British Insurers (ABI) said no blanket payment holiday from the sector was currently being worked on.
LV FS told Mortgage Solutions it had started to pilot a payment holiday for vulnerable customers a few weeks ago before the outbreak got serious.
When the outbreak reached crisis point in the UK, the insurer was ready to offer the break to customers in financial difficulty. Each holiday application will be assessed on a case-by-case basis, but Mortgage Solutions understands it was designed for a broad range of vulnerable households.
Policy cancellation risk
Mortgage and protection specialists are concerned that their clients, struggling to meet day-to-day living costs, would cancel protection policies to save money in the short term.
Lea Karasavvas, managing director of Prolific Mortgage Finance, said: “We hope providers will look to follow the mortgage companies and provide payment holidays for their policy holders in financial strife so people can remain covered through these difficult times, however, getting any provider to respond to this so far has proved a challenge.
“It is vital that people remain insured when they need it most, rather than lapse policies to try and save a few pounds when times are hard as it could be a decision that they and their family will regret, with terrible consequences.”
Peter Lurie, managing director of advice firm Proactive Medical and Life, agrees that insurers should be stepping up to offer a payment holiday.
“This is when insurers are most needed,” he said. “If there is a holiday period for mortgages for three months, insurers should be taking exactly the same stance.
“There should be a pause on premiums, and policy holders should not be penalised for it. This is where insurers should come through for everybody.”
What the insurers say
Scottish Widows and Legal & General would not comment on whether they would offer payment holiday but said policy holders should call them if they thought they would struggle to pay their premiums.
Aegon said it was still considering how best to help its customers and advised them to speak to their financial adviser rather than cancelling a policy.
Aviva said it was not offering payment holidays and was “continuing to monitor the developing situation closely”.
AIG is looking at ways to help customers, but has not yet developed a solutions Mortgage Solutions understands. The Exeter has not made plans to offer payment holidays either.
Vitality said it was “reviewing a number of options that will provide further support to [customers] over the coming months”. Vitality was praised by Lurie, however, for offering cashback to health insurance policy holders who used NHS hospitals instead of private facilities.
British Friendly has temporarily relaxed its premium holiday (career break) rules, reducing the qualifying period from one year to one month’s premium paid. This feature allows policyholders to suspend their premiums but they will not have any cover during this period.
Zurich said it had investigated offering payment holidays but because of its systems there was no easy way to implement them. The insurer said it did not want to offer a service it could not administer. Instead it was focusing on making the process of changing benefits, reducing and increasing cover easier.
Guardian did not respond to Mortgage Solutions’ questions.
‘We’re all in this together’
Chris Hulme, director of The Clayton Hulme Partnership, said insurers should have a facility that allows them to offer a premium holiday if a client calls up and explains they will have to cancel their policy because they can’t afford to pay.
“Our clients need us now more than ever before,” said Hulme. “The government says we’re all in this together so insurers should embrace that sentiment. The attitude should be, do whatever it takes to help people stay protected in these challenging times.
“They could well be taking the government’s 80 per cent wages support package for furloughed employees, so they should give back by supporting their customers,” he added.
Other support measures being offered by insurers include temporarily reducing the amount of cover in place to lower the cost of premiums and extending waiting times.
Some providers offer two month grace periods which keep cover in place if a policyholder has missed a payment and some income protection policies come with unemployment clauses which suspend premiums and cover.
An ABI spokesperson said: “Home, motor and travel insurance providers have committed to offering enhanced customer support and flexibility during this difficult period.
“It is a commercial decision by individual firms if they want to compensate their customers with payment holidays. Insurers are encouraging customers who face difficulty paying their premium to speak to them.”