FCA review reveals shortcomings in the provision of premium finance for general insurance

Published: 11/05/2015     Last Modified: 11/05/2015

A Financial Conduct Authority (FCA) review has revealed that insurers and insurance intermediaries are not always providing customers with clear information about the different payment options available, when buying general insurance products.

The FCA thematic review of premium finance focused on the online sale of home and car insurance and followed the customer journey up to the point where purchasers are required to input their payment details. The review included 13 insurers and 30 insurance intermediaries (including four price comparison websites).

Linda Woodall, acting director of supervision at the FCA said:

"Consumers should expect clear information about the payment options available to them. Regardless of whether people choose to pay upfront or in instalments, it’s important that they can see exactly what they are signing up for and how much it costs so they can decide whether they are getting a fair deal."

The FCA’s findings reveal that insurers and intermediaries do not always provide clear and easily understandable information about the overall cost of paying for insurance, meaning that consumers could struggle to compare the difference between paying upfront or in instalments. In some cases, people may not realise there is a price difference between the two.

If a firm is providing regulated credit or is acting as a credit broker, they are required to provide a representative example setting out the interest rate, any fees or charges, a representative annual percentage rate (APR) and the total amount payable. However, FCA researchers found a number of cases where this was either not provided or the example did not include all of the required information, potentially limiting a customer’s ability to make an informed choice about how to pay.

The FCA review also identified a wide range of APRs, highlighting the importance to customers of having appropriate information to be able to compare pricing and understand the impact that the cost of finance has on the overall cost of an insurance product.

The FCA also found:

  • An adequate explanation of a proposed credit agreement was not always provided sufficiently early in the customer journey to enable customers to make informed decisions
  • Firms acting as a credit broker did not always disclose the name of the credit provider or details of their relationship with the firm
  • In some cases it was not made clear that a fee would be charged.

The FCA expects all firms to consider the findings of the review and take action where necessary.  It is also following up with individual firms where it found specific examples of failings and poor practice.

Notes to editors

  1. Thematic Review 15/5: Provision of premium finance to retail general insurance customers
  2. On the 1 April 2013 the Financial Conduct Authority (FCA) became responsible for the conduct supervision of all regulated financial firms and the prudential supervision of those not supervised by the Prudential Regulation Authority (PRA).
  3. The FCA has an overarching strategic objective of ensuring the relevant markets function well. To support this it has three operational objectives: to secure an appropriate degree of protection for consumers; to protect and enhance the integrity of the UK financial system; and to promote effective competition in the interests of consumers.
  4. You can find more information about the FCA, as well as how it is different to the PRA.

Back to top >