UK regulator warns of underinsurance risk as cost-of-living pressures mount

3 October 2022

The Financial Conduct Association (FCA) has asked UK insurers to work with policyholders as increasingly strained household budgets raise the risk of some cutting back on insurance.

The watchdog says it has written to industry CEOs to ensure customers are protected from costly fees, add-ons, and unfair penalties. It issued warnings to insurers, saying it will “quickly intervene” in instances where poor practice is found.

The FCA says despite further government support to ease soaring energy prices, customers in financial difficulty will continue to face pressure to pay insurance premiums on time.

It warns that consumers face additional risks to their physical and mental health from strained finances that could worsen ongoing situations.

“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,” FCA Executive Director Sheldon Mills said.

The FCA says insurance firms should look to reassure customers and aid those facing exorbitant costs by waiving reassessment and cancellation fees for at-risk consumers.

The regulator has introduced several consumer protection guidelines for financial institutions during the cost-of-living squeeze to ensure affordable prices.

“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,” Mr Mills said.