Insurers to give three month payment holidays and refunds to struggling coronavirus customers
INSURERS will have to offer coronavirus-struck customers help including three month repayment holidays, it's been revealed.
Other measures outlined by city watchdog the Financial Conduct Authority (FCA) include reducing premiums and offering partial refunds of unused policies.
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Today's package of help applies to general insurance and small business customers, and follows a consultation after the FCA first revealed the plans earlier this month.
Insurers are expected to follow the new guidance, and the FCA could take enforcement action if they don't.
The measures won't take force until May 18, when they'll be in place for three months, but many insurers have already been offering similar help to customers.
Some car and home insurance providers, for example, already offer three month payment holidays, while some travel insurance providers have been refunding policies given customers can't currently travel outside the UK.
What coronavirus help do insurers already offer?
HERE'S a round-up of some of the help already offered by insurers to struggling customers:
Car insurance
- Admiral: Offering £25 refunds on all car insurance policies.
- Aviva: Offering up to three month payment holidays on monthly policies. It won't, however, offer payment holidays or refunds on annual policies.
- Axa: Allowing monthly customers to pay off their policy in one payment or arrange a payment plan to clear arrears over an agreed period of time on a case by case basis.
- Churchill and Direct Line: Offering monthly payment holidays on a case by case basis. On annual policies, you need to contact the insurer to discuss your options, which could include moving to monthly repayments or reducing cover levels.
- LV=: Offering £50 cash grants or up to £50 car insurance policy refunds.
- More Than: Offering payment holidays for one month at a time on a case by case basis, for up to three months. Annual policyholders can't defer payments.
Travel insurance
- Aviva: You can claim a refund of the proportion of the policy you haven't used. But no refunds given on annual policies.
- Axa: You can claim an up to 65 per cent refund on single-trip policies purchased before March 13. Annual policyholders can request a refund of the unused part.
- Churchill/Direct Line: Not offering refunds on single or annual trip policies.
- LV=: Customers can cancel annual policies and claim a pro-rata refund. Unused single trip policies can be refunded in full.
- More Than/RSA: You can claim a full refund of unused single trip policies but on refunds due on annual policies.
Separately, the FCA is still consulting on how insurers can ensure products provide value during the coronavirus crisis.
It is also taking business insurers to court to determine whether they can make a claim on insurance policies for coronavirus disruption, although there's no update on when this might take place.
What's changing?
From May 18, when struggling insurance customers contact their provider the FCA says firms should reassess their risk profile to see if their existing policy needs tweaking, and consider if other products would better meet customers' needs.
For example, a motor insurance customer might no longer need associated add on cover such as key cover, or they could be moved from fully comprehensive cover to third party fire and theft.
The FCA says these actions could result in a reduction in monthly premiums for customers paying by instalments or a partial refund of premiums for customers who have paid up front.
If changes are made to existing policies, the FCA says firms should waive cancellation charges and other associated fees.
In addition, for customers who pay monthly, insurers will also have to check the interest being charged is fair given the coronavirus crisis.
Where changes to existing policies doesn't help, insurers will be expected to offer payment holidays of at least one to three months, although they can extend this at their own discretion.
Customers have until August 18, 2020 to request a deferred payment.
If a payment holiday isn't right for customers, for example insurers believe customers may struggle to pay higher premiums to recover missed payments, other options need to be given.
It's down to the insurer to decide what help is granted, but the FCA says this could include reduced repayments, changing the term of the agreement, waiving missed or late payment fees, and permitting customers to amend their repayment date without any cost.
Providers have also been told to make it clear to customers what help is on offer.
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The FCA says it will review the measures in three months time to decide whether they need extending beyond August 18, 2020.
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Sheldon Mills, interim executive director of strategy and competition at the FCA said: "Many firms in the insurance industry have already taken some of the actions we are suggesting here to support customers, such as premium reductions, discounts, waiving fees, and payment deferrals.
"The measures confirmed today will provide urgent support to those that need it."