global insurance management

Premium Finance

Nov 19 2012

Premium Finance

Relevance:             All firms that offer premium finance arrangements.

Action required:     Be aware of possible FSA activity.

We have been alerted to the start of a possible review by the FSA into premium finance arrangements, especially those involving commercial customers.

It might be queried as to why the FSA is looking into an area that is not within its current remit but it should be remembered that responsibility for consumer credit is soon to be passed on to the proposed new regulator and there is also the “treating customers fairly” position.

Whatever the reasoning behind this action, it is clear that the FSA has a concern that something may be amiss.  We understand that a number of brokers have been contacted and asked to supply certain information such as:

  • The amounts of interest and commission brokers receive from premium finance arrangements;
  • How much of an extra levy do brokers add to premium finance arrangements for their clients;
  • Whether the additional levy is disclosed to the client;
  • How much information brokers give to their clients about the range and details of premium finance arrangements; and
  • Whether brokers run their own premium finance schemes or use the services available from an insurer or a third party.

Forewarned is forearmed! 

If this is an area of business that your firm is involved in, now might be a good time to review the agreements you have with relevant providers and what your own position is if you were to be asked for details as above.

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