FIN. TeamThe FCA has released its consultation paper on insurance guidance for the support of customers in financial difficulty (CP23/1).
The FCA views that the number of customers in financial difficulty has increased in recent years, particularly post the coronavirus pandemic. In November 2020, the FCA released its finalised Covid guidance for insurance and premium finance firms to support customers in financial difficulty due to the coronavirus pandemic (Covid Guidance). In this new consultation, the FCA seeks to extend this guidance to all customers in financial difficulty, not just those detrimentally impacted due to the pandemic. It proposes to do this by superseding and expanding the scope of the insurance aspects of the Covid Guidance to cover all customers in financial difficulty, irrespective of the reason for being so.
The consultation will predominantly impact insurers and insurance intermediaries, and be relevant to:
- premium finance firms and stakeholders with an interest in general insurance and protection
- consumers in financial difficulty
- consumer representatives
- charities and other organisations with a particular interest in insurance and customers in financial difficulty
- trade bodies representing insurance firms
The FCA’s proposed guidance aims to:
- reduce the impact of financial difficulty on customers
- help customers maintain an appropriate level of insurance they can afford
- reduce the risk of customers losing appropriate insurance cover that is important to them
The guidance sets expectations on firms regarding actions they should consider taking to support customers in financial difficulty. The FCA perceives this will also help firms meet their obligations under ICOBS 2.5.-1R (the Customer’s Best Interest rule) and PRIN 12 (which come into force from July 2023, along with the FCA’s other Consumer Duty rules and guidance).
Consultation timeframe
The consultation closes on 11 March 2023. The FCA is seeking feedback and comments on its proposals, including the draft Handbook text in Appendix 1.
It will consider the feedback and aims to publish a final Policy Statement, including its response to feedback, in Q2 2023.
If the guidance is made the FCA intend to bring it into force on 31 July 2023.
