Regulator relaxed about broker charges following probe
The FSA has finished its probe into brokers’ premium finance deals, but will not take further action provided that intermediaries are transparent, Insurance Times can reveal.
Last year the FSA started questioning brokers about their premium finance deals as part of a thematic review.
The regulator found big differences in the annual percentage rates (APRs) charged on insurers’ premium finance deals, compared to third-party products. Some third parties charged up to 20% APR, whereas most insurers charged less than 5%.
It also found that 29% of brokers did not give their customers access to the cheaper insurer plans.
The FSA also found that selling premium finance made up to 5% of some brokers’ top line revenue, and “significantly” more of their bottom line profits.
But FSA head of general and wholesale insurance Simon Green said the regulator was not criticising the profit brokers make from the products.
Speaking to Insurance Times, he said: “From our perspective, it is very important that there is a vibrant, sustainable broker market out there, and we recognise as part of that that brokers need fair remuneration as part of the transactions that they are undertaking on behalf of the client.
“But it’s that last part that’s the important piece, that when they undertake the transaction they have the client at the heart of their business model and the heart of their thoughts.”
Green said that the FSA wanted brokers to make sure their premium finance deals met the FSA’s rules laid out in its principles and handbook.
He added that brokers should be transparent with their customers about the premium finance products they provided and avoid conflicts of interest.
The FSA will carry out spot checks to make sure brokers are sticking to the rules. Green warned that if the regulator finds brokers not complying, it could become tougher on the issue.
The regulator has published a guide for brokers selling premium finance here.
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