Car insurance companies have been told by the Financial Conduct Authority (FCA) that motorists should expect value from services during a period of economic uncertainty and that policies should be reviewed. The FCA states the effects of coronavirus may mean there has been a reduction in the chance of insured events happening.
The guidance has been issued to all insurance firms and is set to affect various sectors differently.
However, these changes are set to have a more profound change where the product provides little to no utility to customers as things stand.
The FCA highlights this could be the case for public liability insurers for businesses that cannot open.
However, despite the FCA encouraging car insurance firms to reassess the value of policies, the new changes do not make it mandatory for firms to offer changes.
“Some firms may choose to go further than this, which we would welcome, but do not require.”
The guidance adds: “This guidance does not create an expectation that firms should reassess the value of policies at a policy level because of coronavirus where claims are still generally possible but the likelihood of a claim may have changed, e.g. reduced car usage.”
Under previous guidance, the FCA has already urged firms to reassess the risk profile of customers during the crisis.
The FCA says this may have changed due to the outbreak which could offer scope to ”materialy lower premiums”.
These payment holidays should be for a period of three months but companies can offer longer extensions if they wish.
Alongside these changes, firms are being pushed to offer further financial relief on a temporary basis.
This can include accepting a reduced repayment rate or simply waiving any late or missed payment fees.
The FCA also expects firms to consider reviewing their interest rates to determine whether these are fair under the exceptional circumstances. Some insurers have decided to offer refunds to motorists but this has not yet been pushed by the FCA.
Published at Wed, 03 Jun 2020 13:32:00 +0000