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19
MAY
2020

Insurance policy premium holidays

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The is to update you on the latest news regarding premium payment holidays for protection insurance policies and how individual insurers are dealing with this.

Background

The FCA issued guidance to insurers late last week, in which it confirmed a series of temporary measures to help customers who hold insurance and premium finance products and who may be in financial difficulty because of coronavirus (Covid-19).

They set out actions they expect insurers to take such as reducing premiums where claims risk is materially lower.

Where amendments to the insurance cover do not help alleviate the temporary payment difficulties for customers paying their premium in instalments, then the FCA expects insurers to grant customers a payment deferral or ‘holiday’ (unless it is obviously not in the customer’s interests to do so).

The payment holiday can be offered for between 1 and 3 months, and customers should be able to request the holiday at any point during the period up to 18 August 2020 (while the window for requesting a payment deferral is open).

Where a payment deferral is not considered appropriate, insurers should promptly offer other ways to provide temporary relief to the customer. These could potentially include (but not be limited to): accepting reduced repayments, or rescheduling the term waiving missed or late payment fees, permitting a customer to amend their repayment date without any cost.

Insurers are adopting a range of measures in line with these changes. Many are now permitting a premium holiday for all or some of the premium, but there may be conditions applicable based on factors such as the clients’ personal situation and the length of time the policy has been in force. It may be that the insurer will suspend cover, or they may continue cover but on reduced terms.

The table below gives an overview of how some of the key insurers are managing this, which is correct as of 18th May, but given this is a rapidly changing situation you should check the insurers web site for an up to date situation.

Where an insurer allows a payment holiday with full cover, they will generally expect the premiums to be caught up after the 1, 2 or 3-month payment holiday period or, in the unfortunate case of a claim during the payment holiday, deducted from the amount paid out. The repayment terms varies from one insurer to another. This is different to mortgage holidays and, in many scenarios, it may prove difficult for customers to catch up the missed premiums, which could eventually result in the policy lapsing and being cancelled at a later date.

Note re L&G: to be eligible for L&G payment holiday the customer must be no more than 1 month in arrears, have an active DD and the policy number should not start with ‘UK’.

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