The Financial Conduct Authority has expressed concern that mounting pressure on household budgets may force some customers to cut back on essential insurance, leaving them without protection.
The FCA has told insurers in a ‘Dear CEO’ letter that they need to ensure customers are protected from unnecessary products or add-ons and unfair penalties.
The watchdog said it will quickly intervene where it sees any poor practice.
It also warned insurers to watch out for consumers facing pressures on their physical and mental health due to the cost-of-living crisis.
The regulator said insurers needed to identify customers in financial difficulties and help them by reassessing current needs, considering the suitability of current products and providing clear information on the additional cost of premium finance.
They also need to work with customers to avoid the cancellation of necessary cover, waiving fees for policy adjustments and consider the removal of cancellation fees for those in financial difficulty.
Sheldon Mills, executive director, consumers and competition at the FCA, said: “Customers who are struggling with their finances should contact their providers as soon as possible. We encourage customers to continue to shop around to find the best deal.
“Firms should not unfairly penalise them for any payment difficulties but instead work with them to find solutions.
“We have a thriving and efficient insurance sector and we want people getting the cover they need at a cost they can afford so both business and customers benefit.”
The FCA previously warned lenders that it expects them to support borrowers who get into financial difficulty during the cost-of-living crisis.
It has also told banks to improve the way they treat struggling small business owners.
