Law360, London (October 16, 2020, 1:59 PM BST) -- The finance watchdog proposed new measures on Friday to protect insurance policyholders and customers with loans who remain in financial difficulty amid the COVID-19 crisis and to ensure that vulnerable consumers get support after existing measures expire on Oct. 31.
The Financial Conduct Authority said it is asking the insurance sector to offer a range of options to help customers who are still struggling to make ends meet because of the lockdowns or who are newly in financial difficulty as a result of the coronavirus.
"The proposed guidance sets out how firms should provide tailored support to consumers who have already had a payment deferral and those newly in financial difficulty due to changed circumstances relating to coronavirus," the FCA said.
The FCA is opening the proposals for consultation until Oct. 20.
The regulator is proposing measures including a requirement for insurance companies to re-assess the risk profile of customers to establish whether they are eligible for lower monthly repayments.
It is also considering whether insurers can offer consumers different products to help meet their needs during the pandemic. The FCA also urged insurers to offer consumers help to avoid their cover having to be canceled altogether.
Premium finance customers should be offered the ability to make reduced payments, or no payments, for a specified period of time, the FCA said. These borrowers have taken out loans from banks or finance firms to cover the costs of their insurance premiums.
Firms should also offer premium borrowers the chance to have their interest fees suspended, waived or canceled during the crisis. The FCA also said that finance companies should give consumers a reasonable amount of time to repay any debt and should offer to defer the payment of arrears.
The finance watchdog clarified that these guidelines differ from those that have been in place since March. Finance companies and insurers are not expected to preemptively contact all consumers who have missed payments, which was the case with the previous guidance.
The forbearance measures in the premium finance sections of the guidance have been limited to regulated credit agreements, so will not apply to non-regulated instalment payment arrangements such as pay-as-you-go loans, the watchdog said.
But the FCA added that insurers are still able to offer forbearance outside these situations if they choose to.
The watchdog announced measures to assist insurance policyholders who were struggling to make payments due to COVID-19 in May. The rules require insurers to offer support to customers struggling to pay premiums after having lost their jobs or fallen ill.
But the FCA said in August that it would extend the rules until Oct. 31.
The FCA has also introduced payment freezes and loan holidays on high-cost credit products, including payday loans and car finance. The regulator has also put in place mortgage breaks.
--Additional reporting by Martin Croucher. Editing by Ed Harris.
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