The FCA has issued a relatively short (30 pages) Consultation Paper CP23/1 “Insurance guidance for the support of customers in financial difficulty”, aimed at insurers and insurance intermediaries. The Consultation is accompanied by a press release, and an FCA website page introducing the proposed new Guidance and including a link to an online response form.
Whilst this is mainly updating the equivalent and previously issued finalised guidance, it includes a wider financial difficulty message and there are points to note and a broadening of scope to cover all customers in financial difficulty, regardless of the reason for being so.
The FCA is seeking to retain the expectation that firms should not cancel insurance policies solely because of non-payment without first considering actions to support customers who may be in financial difficulty.
The Consultation introduces a new section of the Insurance Conduct of Business Sourcebook (ICOBS), Section 2.7, and carries on the themes of the Consumer Duty, with references to the new Principle 12 and to the FCA’s previous work on vulnerable customers.
The FCA explains that the Consultation ignores premium finance as this will be covered in an equivalent updated credit Consultation in due course, but firms should be aware that missing premium payments can be a key indicator of financial difficulty.
Firms will not be able to identify all of their customers who may be in financial difficulty, but should be aware of ‘triggers’ such as where the customer contacts the firm about having financial difficulty or where there are indicators (missed payments, cancelation requests of important cover, staff engagement with customers, customers not renewing their insurances) that a customer may be struggling.
The FCA suggests that firms should make customers aware of, and help them to understand, the support available to them in the event they experience financial difficulty, and also to allow those customers to easily contact the firm. This could include sufficiently prominent information in the firm’s communications or on its website, and making it easier for customers to contact the firm when they need help.
The Consultation sets out a number of potential actions and remedies for firms, including reassessing customer risk profiles, considering other products, adjusting covers, striving to avoid the need to cancel covers, and considering reducing fees and charges.
The consultation is open for two months, with a deadline for replies of 11th March 2023.