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Insurers told to consider waiving cancellation fees for struggling customers

Nick Cheek
Written By:
Nick Cheek

The City watchdog plans to extend support for insurance customers who are in financial difficulty.

The Financial Conduct Authority (FCA) introduced guidance during the pandemic to help customers who were struggling from the impact of lockdown and Covid.

Now the watchdog wants the support to be offered to anyone who is facing issues with their finances.

The support means, for example, insurers should consider whether a different product is more suitable under the circumstances. Insurers were also told to waive cancellation fees or other costs linked to changing policies.

It comes as the FCA said it has seen a significant increase in recent years in the numbers of people in financial difficulty.

The proposed change comes against the backdrop of the cost-of-living crisis and will be consulted on until 11 March.

‘Access to insurance is vital’

Sheldon Mills, executive director, consumers and competition at the FCA, said: “Access to insurance is vital, providing peace of mind and security in case things go wrong.

“By extending our guidance, we are helping consumers keep that safety net, and ensure they’re properly supported when they claim, even as the cost of living increases.”

This consultation builds on guidance that the watchdog sent to firms in the wake of the pandemic and the cost-of-living crisis.

In September 2022, for example, the FCA set out in a ‘Dear CEO’ letter that it expects, among other things, that firms handle claims promptly and fairly; provide appropriate support for customers in vulnerable circumstances, and make sure customers get access to fair value products.