Martin Lewis car insurance warning as expert warns motorists NOT to take payment holiday

Martin Lewis revealed those who request a payment holiday may end up paying more than usual because interest will continue to be charged on their policies. The Money Saving Expert specialist said “hideous interest” rates would still apply which could see overall costs increase. 

The FCA says: “We also expect firms to consider reviewing any interest rates associated with instalments to determine whether they are consistent with the obligation to treat customers fairly in the light of the exceptional circumstances arising out of coronavirus.”

Mr Lewis confirmed payment holidays will be made available from Monday after a slight delay to the scheme. 

He revealed car insurance companies will first review a customer’s scheme to see where they could save on an agreement before going ahead with the payment holiday. 

This could see firms reduce the level of cover offered from fully comprehensive agreements to a third party, fire and theft policy. 

Martin Lewis has confirmed motorists average yearly mileage will also be reviewed as this is likely to be dramatically lower than initial estimates. 

The FCA’s guidelines also say firms should waive cancellation fees and any charges usually applied for adjusting policies. 

Sheldon Mills, interim Executive Director of Strategy and Competition at the FCA praised many firms who had already offered support measures to customers before guidelines were in place. 

She said: “As with other areas of finance, we have worked quickly to draw up measures to help policyholders in financial difficulty because of coronavirus. 

“Many firms in the insurance industry have already taken some of the actions we are suggesting here to support customers. 

“Such as premium reductions, discounts, waiving fees, and payment deferrals. The measures confirmed today will provide urgent support to those that need it.”