The FCA has published a Thematic Review (TR15/5) on the “Provision of premium finance to retail general insurance customers”, which identifies major shortcomings in the provision of information to customers. These shortcoming make it difficult for some customers to make informed decisions, and to understand the nature of the services being provided to them.
The FCA’s review looked at the “online customer journey” or “purchase journey” followed by the customers of 13 general insurers and 30 general insurance intermediaries, up to the point where they were asked to input their payment card details; and it focused on the sale and purchase of private motor and household insurance products. The FCA notes that, although information is sometimes provided after the point of payment, customers often make their decisions about payment methods before they reach that point; and, when they do, it’s often without the benefit of enough information.
The FCA explains that, when firms sell a contract of insurance and arrange or provide premium finance for their retail customers, the following requirements will, or may, apply – the FCA’s:
- Principles for Businesses (PRIN), and especially Principle 6 (Customers’ interests), and Principle 7 (Communications with clients);
- Insurance Conduct of Business rules (ICOBS), especially ICOBS 6.1.5R (Ensuring customers can make an informed decision);
- Consumer Credit sourcebook (CONC) and the requirements of the Consumer Credit Act (CCA).
The FCA identified shortcomings in the following areas:
- Firms “had not always taken steps to provide sufficient, clear and consistent information on the overall cost of the insurance product and how this is affected by choosing to pay for it in installments[,] during the early stages of the customer’s journey” – almost 45% of the websites reviewed by the FCA did not meet its expectations in this area;
- The majority of the firms that were providing finance under a regulated credit agreement, or a credit broking arrangement, did not give their customers all the information they were required to give by CONC and the CCA, including:
- Representative examples and representative APRs;
- A Pre-contract credit information form (known as a SECCI); and
- An “adequate explanation” of the proposed regulated credit agreement.
- Almost 90% of the firms that were providing finance under a regulated credit agreement, or a credit broking arrangement, failed to give their customers enough information, and/or information that was sufficiently clear, for them to be able to understand the role the firm was playing, and the remuneration it would receive, if a credit product was used to meet the cost of the relevant insurance premium.
The FCA expects firms to (a) consider the issues identified in its Review; (b) assess their compliance with their legal and regulatory obligations; and (c) address any shortcomings “promptly”. The FCA says it will engage directly with individual firms and “may consider using the full range of regulatory tools if appropriate”.