CP23/1: Insurance guidance for the support of customers in financial difficulty

The Financial Conduct Authority, FCA, has launched a consultation on a proposed new guidance for insurance firms and their intermediaries as regards the treatment of customers that experience financial difficulties (new ICOBS 2.7 guidance on „Customers in financial difficulty). The guidance follows similar advice issued to insurance firms during the COVID-19 pandemic which was, however, not retained in the Insurance: Conduct of Business Sourcebook (ICOBS) of the FCA.
Specifically, the FCA proposes to adopt new ICOBS 2.7 to request insurance firms and their intermediaries to – among other things –
1. provide customers experiencing financial difficulties with sufficient and „good outcomes-focused support“ that is commensurate with a customer’s financial situation and that permits the customer to retain important insurance policies;
2. consider both the purposes of the policies of affected customers and the interests of all customers (policyholders) when determining the type of support that can be offered to customers;
3. provide customers with information about their options in this context;
4. signpost important information for customers experiencing financial difficulties, such as the prominent disclosure of any websites, telephone-numbers, etc. where support can be found;
5. identify customers on their own that may be experiencing financial difficulties (e.g. customers that have missed payments or customers that have contacted the firm) to make them aware of their options keeping in mind the issues noted under points (1) and (2) above; and
6. consider various options in their support such as reduction of payments, reduction of fees, policy changes, or reassessment of customer’s risk profile.
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As the above summary only briefly describes the key elements of the proposed new guidance, please refer to the original document for more detailed, comprehensive information. The consultation closes on March 11, 2023.