How are insurers supporting Financially vulnerable clients? – february forum recap

“Essentially, the paper sets out the standards expected of insurance firms when supporting customers that are experiencing financial difficulties. Now, if you remember back in November 2020, the FCA did publish a finalised guidance and that was with regards to supporting customers in financial difficulty because of the pandemic. So, in recent years, we’ve obviously seen customer’s face the cost-of-living crisis, significant changes for them and how they can adapt to those financial difficulties. The FCA are essentially proposing to replace the insurance aspect of the COVID guidance and extend the scope that applies to all insurance customers. So the purpose is essentially to reduce the impact of financial difficulty experienced by the customer.”

“They want to be able to enable the customer to maintain an appropriate level of insurance that the customer can afford moving forward and reduce the risk of the customer losing appropriate insurance cover. They want to focus very much on the cost-of-living elements and then enable insurance firms to put in the right methods and processes for the clients to make those good decisions, essentially… But some of the actions that the FCA are asking insurers to consider is to reassess the risk profile of the customer and question ‘actually, has that changed since they’ve purchased the policy?’ “

“It’s about adjusting the cover to consider any financial change in circumstances and working with customers to avoid the need to cancel the cover. That’s the biggest part of this. We don’t want them to have to cancel that cover if there are other ways to be able to get around that… It’s about communication, empathy and urgency. How do we look at this from an insurance perspective? It’s around treating customers with empathy, offering them support and assistance to help them manage their finances.”

“The FCA ran a survey in 2022 that showed one in four adults, which is nearly 13 million people, currently have low financial resilience. This will come as no surprise to anyone here, and that basically means they’re at risk of coming into difficulty if they suffer a financial shock, which is what we’re here to protect against. So in terms of the expectations for insurers, the key takeaway for us is flexibility and being flexible in our approach, but not necessarily expecting premiums to be waived entirely. And I think that’s quite a key point because we supported hundreds of customers during COVID by waiving premiums for up to three months. But we kept the policy live and we also enabled customers to claim during that time. I don’t think a blanket approach such as that works quite as well for something as widespread as the cost-of-living crisis that we’re currently living in. We’re also expected to closely monitor cancellations, arrears and trends, and there’s a big focus as well on communication – we need to communicate the consequence of somebody that might reduce or cancel their cover.”

“So far what we’ve done at the Exeter is set up core classifications for members calling us and expressing that they may be struggling to pay for their premiums. And at the moment it has actually been surprisingly low in terms of the quantity of calls we’re getting from a member perspective. Obviously, we are talking closely with advisors as well about the situation with their own clients in terms of products or product focus. We do have the sort of flexibility that the FCA would be looking for… our mailing will basically be letting members know that we’re committed to helping them keep their cover in place. And we’ll take an individual approach to what’s best based on their circumstances.” 

“In terms of our communications to customers, first of all, we issue annual benefit statements to all of our customers just outlining the cover that is in place, the flexibility options that are available within their products and the various value-added services that come with a contract. So we’re in the process of reviewing things like that and also some wider communications just to make sure all risks are presented to the customers.”

“I think in terms of flexibility, I think Zurich, we’re in quite a strong position in terms of the various options that are available within the contract to both dial-up and dial-down… the contractual options that are available within the market would pretty much require any underwritten benefit to go back through underwriting. So is that the best outcome for the customer? Is that the best outcome for the insurer and the advisor? I think we’re considering all of the options that are available to us and obviously taking a look back at what we did during COVID, because as you say, the guidance is effectively the COVID guidance being broadened to all customers.”

“If you felt there was a need to do something above and beyond during COVID, is there a reason why you shouldn’t be doing something above and beyond now? The guidance is clear that it’s trying to reduce the impact of the financial difficulty on the customer and helping them to maintain cover longer-term… But I think as it stands at the moment, having such strong contractual flexibility probably puts us in a good position to support most customers.”