Premium finance in the spotlight

The spotlight fell on the premium finance market today as we revealed how the Financial Services Authority (FSA) was conducting a thematic review of brokers.

The FSA’s probe is focusing on the premium finance deals brokers are offering their commercial clients, particularly the terms of the deals being offered.

Until now, this sector of the market has been a relatively low key component of the insurance chain. 

But following complaints received by the regulator, it is now firmly on the radar.

Brokers tactics

Premium finance is sold in a number of ways by brokers. They have deals with premium finance providers such as Close Premium Finance and Premium Credit, who supply financing to brokers’ clients. The broker decides how much it wants to charge customers to pay in instalments.

They also offer finance packages to customers through insurer’s own schemes.

Premium finance can be a lucrative source of income for many brokers, and this is one of the elements the watchdog is keen to explore. The FSA’s aim appears to be whether premium finance is being sold in the best interests of customers.

The review also comes at a time when FSA managing director Martin Wheatley, who will head up the new broker regulator, the Financial Conduct Authority (FCA), has been busy outlining the tough new stance that the FCA will take when it comes into power in spring, including cracking down on mis-selling.

It’s unclear at this stage whether the review will be on the FCA’s radar next year.