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Law360, London (May 28, 2020, 2:04 PM BST) -- One of Britain's biggest insurers has said it will offer "premium reduction" deals to some customers who are struggling financially during the COVID-19 pandemic, after the Financial Conduct Authority urged the sector to provide savings for policyholders.
LV said Wednesday that customers with cover for income protection, critical illness, life insurance and business protection will be able to reduce their premium by up to 75% for six months. But they will also see a reduction in cover, the company said.
The FCA called two weeks ago for insurers to introduce measures for customers struggling financially. The regulator encouraged them to offer premium reductions, discounts and payment deferrals.
LV said its measures followed a "payment break" option for its hardest-hit customers, which involved suspending premiums for three months, with full cover remaining intact. Eighty-seven customers have qualified for the option, with waived premiums totaling £7,650 ($9,300) a month, LV said.
"It is aligned to, but not driven by, the FCA guidance," a company spokeswoman told Law360.
An insurance price comparison site, Compare the Market, said in March that it had suspended sales of income protection policies because of concerns that insurers had hollowed out cover by introducing exclusions over the coronavirus pandemic.
Income protection provides cover in case of lost earnings, either through unemployment or sickness. The LV spokeswoman said the company does not offer protection policies for unemployment.
"We have not applied any COVID exclusions to our income protection plans," the spokeswoman added. "We will pay, and are paying, claims for COVID-related causes."
The company plans to refund £30 million to motor insurance customers who have been laid off or who have not had their salary cut through the government's furlough scheme. The money represents savings the business "expects to make as a result of reduced claims during the lockdown," LV said at the start of May.
Insurance technology company By Miles estimates that U.K. motor insurers expect to save £1 billion because there will be fewer accidents on the roads as a result of advice to stay at home.
Fitch said on Wednesday that insurers were still unlikely to turn a profit, even though there will probably be fewer motor claims.
We think pressure from regulators and consumer action groups will force insurers to return excess profits to customers," the ratings agency said in a report.
--Editing by Ed Harris.
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