Today’s new insurance rights can’t come soon enough

Wide-ranging measures designed to protect insurance customers during COVID-19 come into force today. They can’t come soon enough for Iona, who has spent much of lockdown battling intransigent firms who have turned their backs on policyholders in their hour of need. Here she explains what YOUR insurance rights are and how you can exercise them. After all, even if all the insurers haven’t got your back, at least Young Money has!

The past few weeks have been mind-blowing for a number of reasons. And perhaps one of the most ‘woah’ developments (at least for personal finance geeks like me) has been the rapid response of regulators to what is turning into another severe financial crisis.

The big guys at the Financial Conduct Authority have pulled their finger out, defying critics who have previously lamented their tortoise-like response to most emerging consumer catastrophes. On this occasion, the regulator has acted quickly, putting the pressure on banks, lenders and insurers to make sure they play fair.

It’s easy to see why. Some 7.5 million workers have been put on ‘furlough’ in the past few weeks, and many (though not all) have seen their wages drop by 20%. But those are the lucky ones: many have fallen through the cracks because they weren’t on their employer’s payroll by 19th March. Around 6 million people also expect to made redundant post-coronavirus, according to the Centre for Labour and Social Studies.

Those who are self-employed have had to wait weeks for the Self-Employed Income Support Scheme to come through (even if it has been delivered earlier than expected). This grant covers 80% of average monthly trading profits for anyone who filed a self-assessment tax return in 2018-2019, and have an annual income of less than £50,000. But again, this represents a big fall in earnings for most people, and a huge section of the freelance population aren’t even eligible for the scheme, either because they’re company directors paying themselves a dividend or new to freelancing.

All this helps to explain why 2 million people have had to claim Universal Credit for the first time, and 1.2 million mortgage holidays have had to be granted. But where does all this leave our insurance policies?

Whether we’re protecting our cars, homes, lives, incomes or holidays, insurance is a big part of our lives. And it can be a major outgoing for most of us.

Which is why I’ve been disappointed to see some insurers failing to act quickly and sensitively to customers’ needs over the past few weeks. Hopefully, this will now change with the FCA’s much-needed intervention.

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. Many firms in the insurance industry have already taken some of the actions we are suggesting here to support customers…these measures provide urgent support to those that need it.”

What are your insurance rights?

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Insurers are now obliged to;

  • reassess risk profiles in order to offer you lower premiums (e.g. for cars not being used at this time)
  • revise cover to remove unnecessary add-ons (e.g. key cover) or move you to a new, more suitable policy (e.g. from fully comprehensive cover to third party fire and theft).
  • waive cancellation and other ‘tweaking’ fees.

All this could reduce your premiums at a time when you need all the money you can get – either by cutting your monthly insurance costs, or allowing you a partial refund if you have paid for a year’s cover upfront.

Otherwise, the FCA expects insurers to grant you a payment deferral – unless it is obviously not in the customer’s interests to do so – lasting up to 3 months. Other measures open to insurers who don’t want to go down that route include:

  • accepting reduced repayments, or rescheduling the term
  • waiving missed or late payment fees
  • permitting a customer to amend their repayment date without any cost

Firms should be making all these options clear on their websites and apps, as well as encouraging you to get in touch if you’re struggling.

Why is this necessary?

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Banks and lenders were the first financial firms to really feel the heat from the regulator after COVID-19 hit. They were asked to provide a £500 interest-free overdraft and repayment holidays on debt where they were really needed. Other new measures include increasing credit card limits and waiving late payment fees. None of this should affect your credit score – though I will be returning to why this may not be quite so simple this week.

However, some insurers have been slower to act. Admiral are an honorable exception, granting me and thousands of other policyholders a £25 rebate on our car insurance policies. Well done them – but the silence from other insurers has been notable!

Furthermore, readers of Young Money have got in touch to say they have been abandoned by their insurers just when they needed breathing space. One wrote to me after being made redundant from her job conducting social research interviewers. As she was a freelancer, and not on the company’s payroll by the cut-off date for the furlough scheme, her income disappeared overnight.

She had a car insurance policy with Vavista, and I advised she contact the company to ask if they can defer her insurance payments. She told me that they would even quote her for a renewal and that they would simply end her policy on 10 April.

I asked Vavista on my reader’s behalf about why this had happened, and gave them the opportunity to provide me with an explanation and to get back in touch with my reader to offer a fairer deal. They did neither. It was only when I reminded them recently (via private message on Twitter, the only way of contacting them as a journalist) that I still hadn’t heard from them, and that my reader had had to SORN her car, despite desperately needing it to travel to new work.

Vavista once again failed to contact me – but phoned my reader, expressing surprise that she had cause to complain before saying they would contact the underwriters to see what could be done. Before they would even talk to me, they asked my reader to supply them with my full name and date of birth! I must say that is a first in my time as a personal finance journalist, contacting companies on behalf of readers for 9 years.

I gave Vavista ample opportunity to give their account of why they cancelled my reader’s policy. As they have yet to do so, I name them in this article as one of the bad guys of insurance, really failing to treat customers (and journalists helping them) transparently at this time.

I hope Vavista and other insurers who have been cancelling policies or refusing to help customers wake up and realise that it’s in their interests, apart from anything, to be on the level. Because when companies refuse to co-operate with customers – and indeed journalists – we don’t forget. We all have long memories, and I hope my reader when she’s back on her feet tells this company where to go.

In the meantime, I urge anyone who is being stonewalled by their insurer to get in touch with me and I’ll try my best to help – readers@youngmoneyblog.co.uk.

UPDATE: Vavista has told me that the case is now being dealt with by their complaints managers who has been in contact with my reader. They added: “These details will be passed on to them and we will carry on looking into this from there.” I hope to provide another update soon.

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