Provision of premium finance to retail general insurance customers

The FCA has published its findings from their thematic review which looked into whether general insurance intermediaries and insurers provide timely and appropriate information to their customers, when arranging or providing premium finance.

This is an important aspect for most brokers and hence it is important that you understand the FCA’s concerns.

Although the review was primarily focussed on the on-line home and motor insurance market, the principles and requirements are the same for face-to-face advice and should form part of your firm’s sales process. 

The FCA’s primary concern was that some firms were not meeting the provision of information requirements to their customers and those customers may not be achieving fair outcomes when choosing to pay by instalments when buying insurance.  

Below is a brief summary of the FCA findings:

Firms did not always provide clear and appropriate information on:

  • Payment options and the different costs associated with these;
  • The interest rate, any fees or charges, a representative annual percentage rate (APR) and the total amount payable;
  • The instalment option being offered;
  • The role being performed by the firm when arranging premium finance;
  • The fact the firm was acting as a credit broker;
  • The name of the credit provider or details of their relationship with the firm;
  • Whether a fee would be charged.

As a result customers:

  • May not realise the additional costs of paying by instalments;
  • Struggle to compare pricing;
  • Enter into premium finance arrangements without understanding the key features, terms and risks of the agreement.

The FCA expects all firms to consider the findings of the review, to take action to address the shortcomings and ensure they are complying with their regulatory requirements. 

The Thematic Review Paper TR15/5: Provision of premium finance to retail general insurance customers can be found here.

Important Note: ATEB news is intended to provide general information ONLY. The content, including any views expressed or guidance provided, does not replace the need to comply fully with FCA Rules and Guidance. Unless you have discussed news article content with ATEB, and specifically how it relates to your circumstances, then ATEB disclaims all liability and responsibility and actions arising from any reliance placed upon it. For the avoidance of doubt therefore, any reliance you place on such information without our consultation is at your own risk.

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Our View

If your firm sells general insurance policies to retail clients and facilitates premium instalments / monthly payments for them by credit broking (for which you will need the correct FCA permissions) you need to read and understand the document, it is only 21 pages.

Ensure all communication with customers, written or verbal, is clear, fair and not misleading and that customers receive sufficient information to make appropriate choices.

Action Required By You

  • Read the Thematic Review paper and familiarise yourself with the content;
  • Ensure that your compliance staff are familiar with the ICOBS, PRIN and CONC (the new consumer credit) handbooks;
  • Ensure that the firm has the correct FCA consumer credit permissions;
  • Review and update your sales process;
  • Review and update your consumer documents;
  • Ensure all relevant staff are aware of the requirements;
  • Don’t rely on the finance provider – check and validate what they are issuing to customers to ensure that all the requirements are being met.

If in any doubt about the requirements, contact your ATEB consultant or ATEB directly here and we can audit your procedures to ensure compliance.

About the Author

Steve is an ATEB Director and has a deep understanding of all matter regulatory, built up over his 30 years + in the industry. With a training background and a technical brain, he overseas numerous complex projects and client implementation work.

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