The regulator laid out the guidance on payment deferrals as part of its expectations for how customers of general insurance and pure protection contracts are treated during the crisis.
These include measures such as re-assessing the risk profile of the consumer, considering other products and potentially revising the cover, and waiving any cancellation and change fees.
The FCA is accelerating its consultation on this and the guidance will come into force by 13 May.
Payment deferrals
The payment deferral would allow policyholders to maintain cover without making payments or being considered in arrears.
Mortgage Solutions revealed last month that LV= was the first protection insurer to publicly allow such a payment holiday for its customers.
In its guidance, the FCA said: “Where a customer wishes to receive a payment deferral, a firm should grant it unless the firm determines (acting reasonably) that it is obviously not in the customer’s interests to do so.
“We expect that the payment deferral period, which can be rolling, should be granted for a minimum of one month and up to three months.
“Customers should be able to request a payment deferral at any point after the guidance comes into force for a period of three months.”
The regulator added that there is no expectation under this guidance that the firm enquires with customers to determine if the request is connected with coronavirus.
No charges or fees
The FCA emphasised that it did not expect a customer to be liable to pay any charge or fee in connection with the granting of a payment deferral under this guidance.
And where a payment deferral has been granted it would not expect anyone such as a broker or debt collector acting under recourse arrangements to seek payment from the customer until the payment deferral period has ended.
Missed payments without deferral being agreed due to firms’ operational difficulties should not result in a worsening of customer credit profiles and any issues as a result should be corrected by working with credit reference agencies.
Firms should also ensure no default or arrears charges are levied in relation to payments missed in these circumstances.
Where a payment deferral is not considered appropriate, firms should without unreasonable delay, offer other ways to provide temporary relief, and these can be more favourable.
Re-assess risk
The FCA also suggested insurers should be re-assessing the risk profile of the consumer as some customers will have a risk profile that has changed because of coronavirus.
“For example, some motor insurance customers might not be using their vehicle at all or might no longer be using it for business purposes, and customers could potentially be offered materially lower premiums,” it said.
And firms should consider whether there are other products they can offer which would better meet the customer’s needs and revise the cover accordingly.
“It might be that a customer has revised their demands and needs as a consequence of coronavirus,” the FCA continued.
“For example, a motor insurance customer might no longer need associated add on cover such as legal expense insurance, key cover or other products, or a business may not need certain cover for a period of time.”
It added: “We generally do not expect firms to increase premiums as a result of any reassessment and this is very unlikely to meet our expectations.”
