Financial Conduct Authority: 'Insurance Guidance for the Support of Customers in Financial Difficulty'

LONDON, England, Jan. 12 (TNSrep) -- The Financial Conduct Authority, a provider of financial services, issued the following consultation paper (No. CP23/1) in January 2023 entitled "Insurance Guidance for the Support of Customers in Financial Difficulty."

Here are excerpts:

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Contents

1. Summary ... 3

2. The wider context ... 5

3. Our Proposals ... 8

Annex 1

Questions in this paper ... 14

Annex 2

Cost benefit analysis ... 15

Annex 3

Compatibility statement ... 18

Annex 4

Abbreviations used in this paper ... 22

Appendix 1

Draft Handbook text

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Chapter 1

Summary

Why we are consulting

1.1 In November 2020, we introduced finalised guidance for insurance and premium finance firms to support customers in financial difficulty (COVID guidance) due to the coronavirus pandemic. We are now consulting on replacing the insurance aspects of this COVID guidance with guidance extended to apply to all customers in financial difficulty, rather than just those in financial difficulty due to the pandemic. This is particularly important as the number of customers in financial difficulty has increased in recent years. Our 2022 Financial Lives Survey found that the number of UK adults with low financial resilience increased from 10.7 million in 2020 to 12.9 million in 2022. We will consider the premium finance aspects of our COVID guidance (including forbearance) as part of a separate consultation on the future of our COVID Tailored Support Guidance (TSG) for mortgages, consumer credit and overdrafts.

1.2 This consultation sets out our proposals to help protect customers of non-investment insurance policies in financial difficulty and to provide clearer expectations of firms in supporting their customers. We consider that our proposals will help ensure firms put customers' needs first and will support firms in acting to deliver good outcomes for customers as will be required under our Consumer Duty.

Who this applies to

1.3 This consultation primarily affects insurers and insurance intermediaries. It will also be relevant to premium finance firms and stakeholders with an interest in general insurance and protection, as well as consumers in financial difficulty and consumer representatives, including but not limited to:

* premium finance firms

* consumers in financial difficulty

* consumer representative bodies

* charities and other organisations with a particular interest in insurance and customers in financial difficulty

* trade bodies representing insurance firms

What we want to change

1.4 We are proposing to expand the scope of the insurance aspects of the COVID Guidance to cover all customers in financial difficulty, regardless of the reason for being so. Our proposed guidance will supersede the insurance parts of our COVID guidance.

1.5 As for the COVID guidance, our proposed guidance sets out trigger points where firms should take action and sets expectations on firms about actions they should consider to support customers. These expectations will help firms meet their obligations under ICOBS 2.5.-1R (the Customer's Best Interests rule) and PRIN 12 (which come into force from July 2023, along with our other Consumer Duty rules and guidance) acting to deliver good outcomes for customers. Firms will still need to consider what obligations they have to their customers under our rules for Principle 12, along with other Consumer Duty rules and guidance set out at PRIN 2A and elsewhere in our Handbook.

1.6 Our intervention will give firms clearer expectations on supporting and acting to deliver good outcomes for customers in financial difficulty. The aim of the guidance is to reduce the impact of financial difficulty on customers, help them maintain an appropriate level of insurance they can afford, and reduce the risk of customers losing appropriate insurance cover that is important to them.

Measuring success

1.7 As part of our ongoing supervision of firms we will monitor intelligence, feedback and complaints we receive about the guidance, including from consumers. We also intend to engage with stakeholders such as trade bodies and consumer organisations about the impact of our intervention.

Next steps

1.8 We welcome feedback on our proposals, including the draft Handbook text in Appendix 1. Please send us your comments by 11 March 2023.

1.9 We will consider the feedback and aim to publish a final Policy Statement, including our response to feedback, in Q2 2023. If the guidance is made we intend to bring it into force on 31 July 2023.

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The report is posted at: https://www.fca.org.uk/publication/consultation/cp23-1.pdf