The FCA has published its findings of its review of the provision of premium finance in the retail general insurance market.
The FCA found that firms are not ensuring that customers are able to make informed decisions when they are offered premium finance. Shortcomings were identified in three main areas:
- Firms do not always provide clear and appropriate information on payment options and the different costs associated with these choices, i.e. the difference between paying upfront and paying using premium finance.
- Firms do not always provide appropriate information about the instalment option which they are offering, i.e. firms are not providing an adequate explanation of the credit agreement.
- Firms do not always provide sufficient, clear and consistent information which will ensure that customers understand the role that the firms are carrying out, i.e. that the firms are acting as credit brokers.
The FCA’s report directs firms to consider the issues which have been identified, to assess their compliance with relevant rules, and to assess whether they are meeting the FCA’s expectations. The FCA also intends to take action against individual firms that it has identified as having specific failings or poor practice.
This is clearly an issue which concerns the FCA, and firms should identify any deficiencies in their policies and processes, and take steps to improve them accordingly, in order to avoid the spotlight falling on them. With the FCA indicating that it will engage with consumer bodies to increase customer understanding and awareness, consumers are likely to become more aware of sub-standard documents and procedures and, consequently, more likely to complain to the regulator and/ or to the FSCS. It seems that the FCA is encouraging firms to take action now by indicating that it may save the firms greater trouble further down the line.
A copy of the FCA’s report can be found here: http://www.fca.org.uk/ static/documents/thematic-reviews/ tr15-05.pdf.