FCA Policy Statement 23/9 Finalised insurance guidance on supporting customers in financial difficulty.
The Financial Conduct Authority (FCA) has published Policy Statement 23/9 (PS23/9), which summarises the feedback received and provides clarifications and amendments to the proposed guidance.
The purpose of the guidance is to support firms in delivering good outcomes for customers experiencing financial difficulty and to set out the outcome’s firms should aim to achieve.
The FCA’s response clarifies that the guidance complements the Consumer Duty and helps firms comply with the customer’s best interests rule and their obligations towards customers in financial difficulty. The FCA recognizes the important role of firms with ongoing customer relationships in supporting customers in financial difficulty.
The guidance applies to all firms subject to ICOBS (Insurance Conduct of Business Sourcebook). It covers both retail and commercial customers and includes all insurance customers in financial difficulty, regardless of the reason for the difficulty.
Reasonable steps that should be taken
The trigger points for firms to act are when a customer contacts the firm about their financial difficulty and when firms have identified that a customer is, or may be, in financial difficulty. Firms should take reasonable steps to inform the customer of the support available if the customer has not contacted them.
The level of support may vary depending on factors such as the firm’s role in the distribution chain, type of product, and characteristics of the customer. The FCA emphasises that firms with a direct relationship with customers are better positioned to identify and support customers in financial difficulty.
Firms should not cancel policies solely because of non-payment without considering actions to support customers.
Whilst not exhaustive, reasonable steps firms should take include:
- Reassessing the risk profile of the customer: Firms can review the risk profile of customers who are facing financial difficulties to determine if adjustments can be made to their policies or coverage. This assessment may involve considering factors such as the customer’s financial situation, changing circumstances, and ability to meet premium payments.
- Offering alternative products: Firms can explore whether there are other products or coverage options available that would be suitable for customers facing financial difficulties. This could involve offering different levels of coverage or adjusting the terms of the policy to make it more affordable.
- Providing information and signposting: Firms can provide customers with information about external sources of support and advice. This could include directing them to organizations or resources that offer financial counselling, debt management services, or assistance programs.
- Flexible payment arrangements: Firms can consider offering customers alternative payment options or flexible payment arrangements. This may include options such as spreading out premium payments over a longer period, adjusting payment due dates, or allowing customers to temporarily suspend payments without penalty.
- Reviewing policy terms and conditions: Firms can review the terms and conditions of the policy to identify any flexibility or assistance measures that can be implemented to support customers in financial difficulty. This could involve adjusting coverage, deductibles, or policy limits to accommodate the customer’s needs.
- Reducing the impact of financial difficulty: Firms can explore options to help customers mitigate the impact of their financial difficulties while maintaining an appropriate level of coverage. For example, they may offer partial coverage or reduced premiums for a certain period.
- Proactively communicating support options: Firms should take reasonable steps to inform customers about the available support options, particularly when the customer has not reached out to them about their financial difficulties. This could involve sending targeted communications or making proactive outreach to customers to ensure they are aware of the assistance measures in place.
- Coordinating with other firms: In cases where multiple firms are involved in the distribution chain of a product or service, coordination among them can help provide a comprehensive support system for customers in financial difficulty. Sharing information and aligning efforts can ensure a more cohesive and effective response.
- Avoiding or delaying cancellation of cover: Firms should consider alternatives to immediate cancellation of coverage when a customer is experiencing financial difficulty. This could involve exploring support measures before resorting to cancellation, allowing customers more time to address their financial situation while maintaining some level of protection.
Overall, the guidance aims to provide practical support and guidance to firms to ensure they deliver good outcomes for customers experiencing financial difficulty, while considering the unique circumstances and relationships involved.
The guidance will come into effect on 31 July 2023. Firms affected should consider any changes they need to make to their processes to meet the expectations in this guidance.