Car insurance firms must waive fees and allow delayed payments, says watchdog
The Financial Conduct Authority instructs car insurers to try and save customers money and allow deferred payments
Car insurance firms have been instructed to waive fees and allow delayed payments in order to help customers who are experiencing financial difficulties due to the coronavirus pandemic.
The Financial Conduct Authority (FCA) has told car insurers that they must waive cancellation and other fees that customers usually have to pay when adjusting their policies, as well as reassessing customers’ risk profiles in order to see if their premium can be lowered.
Firms must also consider whether there are other products they can offer which would suit a customer’s needs better than what they’re currently signed up to, and revise their cover accordingly. For a car insurer, this could mean reviewing whether a customer still needs an add-on they have - such as key cover - or if they could be moved from a fully comprehensive policy to a third party one.
These requirements are designed to reduce the payments of customers who pay monthly, or result in a partial refund for those who pay the full annual premium up front.
If no amendments can be made to a customer’s cover to alleviate their payment difficulties, the FCA expects insurers to defer payments for between one and three months. Firms can choose to defer a customer’s payments for more than three months if they wish to do so and it’s in the customer’s best interests.
In cases where a payment deferral is not appropriate, the FCA says insurers should look into other options, such as accepting reduced payments, waiving missed or late payment fees, or allowing a customer to amend their repayment date at no additional cost.
Firms are also expected to review interest rates to ensure they are fair, as well as encouraging customers to contact them if they are having difficulty making payments.
The measures were the result of a brief FCA consultation and will come into effect on 18 May 2020.
Sheldon Mills, interim executive director of strategy and competition at the FCA, said: “As with other areas of finance, we have worked quickly to draw up measures to help policyholders in financial difficulty because of coronavirus. The majority of respondents expressed support for the proposals we published at the start of May.
“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.”
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