FCA warns that government support may not be enough to stop customers cutting back on insurance

The Financial Conduct Authority (FCA) has today announced that it is concerned about insurance protection as household budget pressures continue to mount.

Related topics:  insurance,  Cost of living
Tabitha Lambie | Editorial assistant, Barcadia Media
29th September 2022
FCA logo
"Firms should not unfairly penalise them for any payment difficulties but instead work with them to find solutions. "
- Sheldon Mills, FCA consumers and competition executive director

Following the government’s latest announcement of further financial support for consumers and businesses during the energy crisis, including a two-year energy price guarantee for households, the FCA has warned that it may not be enough to stop people from cutting back on insurance to stay afloat.

Consequently, the FCA has pledged to take further action to support households, through correspondence with insurance industry chief executives. This initiative hopes to make sure customers are protected from unnecessary products or add-ons and unfair penalties. Where poor practice is found, the FCA will quickly intervene to protect customers from harm.

In a recent press release, the FCA highlighted that customers, including businesses, in financial difficulty are more likely to need to pay for their insurance monthly through premium finance. The Authority deemed these customers most at risk of general interest rises which could cause them to face increasing difficulties when paying bills or repaying debts.

However, the FCA believes this wouldn’t solely impact customers financially, instead recognising that this situation will cause pressure on their physical and mental health. This in turn could worsen the impact of their financial difficulties.

The FCA has said that firms can help customers in financial difficulty by reassessing customers’ insurance needs and providing clear information about the additional cost of premium finance. Other measurers include waiving fees associated with adjusting a customer’s policy in line with the reassessments, and considering whether cancellation fees should be removed for customers in financial difficulty.

Commenting on these proposals, Sheldon Mills, FCA consumers and competition executive director, has said:

“Customers who are struggling with their finances should contact their providers as soon as possible. We encourage customers to continue to shop around to find the best deal.  

“We have a thriving and efficient insurance sector, and we want people getting the cover they need at a cost they can afford so both business and customers benefit.”

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