​Close Brothers Premium Finance reveals FCA pricing reform guide for brokers

Close Brothers Premium Finance (CBPF) has published a new guide for its broker partners, to help them navigate the FCA’s pricing and fair value reform, which comes fully into effect from 1 January 2022.

Seán Kemple, CBPF’s managing director, said the guide is a response to information requests from brokers selling personal lines insurance - these businesses want to make sure they are well prepared for the new regime when it comes into force in early 2022.

He explained that many smaller brokers do not have in-house compliance and regulatory teams, so were looking instead for external support.

CBPF will hold a webinar for its broker partners, run by professional services network Grant Thornton, on 7 December 2021 to provide further insight and commentary on the FCA’s reform and clarify what brokers need to be prepared for next year.

Kemple continued: “Although the FCA changes do not impact us directly, smaller brokers in particular are asking where to get more information so they are fully prepared for January.”

Four key areas

On the new pricing rules, Kemple explained that CBPF has compiled answers to several of the most frequently asked questions the business has had from brokers over the past few weeks.

Its guide therefore focuses on four key areas:

• Changes that will apply to price walking.
• Product governance and remuneration.
• Pre-contractual premium finance disclosures.
• Regulatory reporting.

Kemple said: “As the pioneer of premium finance for insurance broking 40 years ago, CBPF has weathered lots of regulatory change, so we have anticipated the new pricing regime and have already begun to think about the next changes around Consumer Duty, which are scheduled for next summer.

“Nearly 75% of our broker partners recently told us the information we provide to them to help them navigate regulatory change is good, but we want them to rate it as excellent.

”It’s incumbent on us to continue to make premium financing as customer focused as we can, creating good outcomes and great customer experiences. That’s the win-win for customers, brokers and providers like us.”

Broker impact

Speaking about the impact of the pricing reform on brokers, Kemple said that while brokers are already obliged to act in a customer’s best interest when proposing and arranging premium finance, new obligations from the FCA include:

• Enhanced pre-contractual disclosure of premium finance at the point of sale, including stating that using premium finance will be more expensive than paying for the insurance upfront.
• Brokers need to consider how they offer fair value to all personal lines insurance customers over the longer term.
• Reporting certain datasets to the FCA so that it can check that the rules are being followed, including data on premium finance annual percentage rate (APR) and fees.
• Senior managers at brokers confirming that their pricing practices comply with the pricing rules - they will be held accountable through annual reporting.

Kemple said: “We have sent the guide to all our personal lines broker partners. We know from our campaign stats the guide has been hugely popular. We are keen to do all we can to ensure our industry is fully up to speed with the changes and that implementation next year is hassle free - for brokers and their customers too.

“The whole industry needs to work together to navigate these changes effectively and in the best interests of customers.”

Copies of this guide are available to all brokers that do business with CBPF.