The new measures require firms to reassess the risk profile of customers, which may have changed due to coronavirus. The FCA said there may also be scope to offer customers “materially lower” premiums.
The authority is also calling on insurers to consider whether there are other products they can offer which would “better meet the customer’s needs and revise the cover accordingly”.
They have also been told to waive cancellation and other fees associated with adjusting policies.
The FCA said that such actions could result in a reduction in monthly premium for customers paying by instalments, or a partial refund for customers who have paid up front.
Where amendments to the insurance cover do not help alleviate the temporary payment difficulties for customers paying in instalments, the FCA said it expects firms to grant a payment deferral unless it is “obviously not in the customer’s interests to do so”.
The payment deferral should be granted for a period of between one and three months, though firms can go beyond three months if it is in the customer’s interests.
Customers should also be able to request a payment deferral at any point until 18 August 2020. Where a deferral is “not considered appropriate”, firms should offer other temporary relief, such as accepting reduced repayments, waiving missed or late payment fee or allowing a customer to amend the repayment date with no cost.
The FCA also expects firms to “consider reviewing” any interest rates associated with instalments to determine whether they are “consistent with the obligation to treat customers fairly” in light of the ongoing pandemic.
Firms should also make the different solutions available clear to all customers, and encourage them to make contact if they are experiencing temporary financial difficulties.
The measures will come into force on 18 May, and be reviewed in the next three months in the light of developments. They may be revised “if appropriate”.
Sheldon Mills, interim executive director of strategy and competition at the FCA, said: “As with other areas of finance, we have worked quickly to draw up measures to help policyholders in financial difficulty because of coronavirus.
“The majority of respondents expressed support for the proposals we published at the start of May.”
He added: “Many firms in the insurance industry have already taken some of the actions we are suggesting here to support customers, such as premium reductions, discounts, waiving fees, and payment deferrals.
“The measures confirmed today will provide urgent support to those that need it.”