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Law360, London (May 14, 2020, 1:30 PM BST) -- Britain's finance watchdog said Thursday it is introducing temporary measures to help consumers struggling to pay for premium finance products and insurance as a result of the COVID-19 outbreak and the effect of lockdown orders on businesses and households.
The Financial Conduct Authority said the rules, which will take effect on May 18 and remain in force for three months, will require insurers and lenders to consider measures such as allowing customers to switch to products that are better suited to the turbulent times created by the crisis.
Finance companies will also have to consider waiving cancellation fees and charges for missed payments, and offering deferred payment to struggling customers.
'As with other areas of finance, we have worked quickly to draw up measures to help policyholders in financial difficulty because of coronavirus," Sheldon Mills, interim executive director of strategy and competition at the FCA, said. "The measures confirmed today will provide urgent support to those that need it."
The watchdog said it will review the measures in three months after considering any changes to the nature of the COVID-19 outbreak and associated lockdown measures.
The FCA said the measures will allow financial services companies to reassess the risk profile of customers to accommodate the pandemic — for example, an individual seeking car insurance might not need comprehensive cover if they will be working from home.
Insurers and lenders will also be able to waive cancellation fees, charges for missed payments and other costs associated with financial products. They should also consider reducing premiums for customers and refunding excess premiums that have been paid up front.
The FCA said that companies should offer the chance to pause payments if such adjustments to insurance terms do not help a customer facing financial difficulty. These deferrals should be granted for between one and three months, and can be longer if this is in the customer's interests.
Where deferred payments will not help, companies should offer other remedies such as reduced payments or an amended repayment deadline, the FCA said.
The regulator also reiterated the expectation that firms will put out clear information for customers about the financial relief they are offering amid the pandemic.
Mills said on Thursday that many insurers have embraced the proposed measures, including payment deferrals and fee waivers.
The FCA announced new rules in April to force banks and lenders to freeze payments and interest on high-cost credit products such as payday loans in another move to support consumers during the public health crisis. It also encouraged banks to introduce payment freezes for customers struggling to pay off credit cards and loans during the pandemic.
They include freezes of up to three months for customers who have fallen ill, been laid off or furloughed.
--Additional reporting by Najiyya Budaly. Editing by Ed Harris.
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