Brokers will not need to apply for full FCA approval as a lender to offer their client premium finance
Bexhill Finance is going head-to-head with the three main premium finance houses to offer a direct lending facility to brokers
This will allow smaller brokers to avoid going through the rigorous FCA authorisation for a consumer credit licence and does not require a minimum borrowing amount. The broker will only need to apply for a variation of permission to introduce clients.
The three main premium finance houses in the market, LaSer UK, Premium Credit and Close Premium Finance lend clients money so that they can spread their insurance premium out into monthly payments.
Since 2001 Bexhill has been helping brokers to set up in-house lending facilities. The client typically pays the broker’s in-house finance company in monthly instalments, while Bexhill loans the broker the difference to pay the insurer the full premium. The broker then pays the loan back to the premium finance company in monthly instalments.
With the new offering, which is in addition to the in-house service, Bexhill settles the premium payments with the broker to pay the insurer, then starts collecting monthly instalments from the client.
Bexhill director Olga Smith said demand from smaller brokers to set up a direct lending facility had grown in the last 18 months. However the brokers have faced stricter requirements from larger premium houses, which typically ask for a minimum amount to be loaned through their facility.
Brokers were also nervous about the additional regulation they would have to comply with after the FCA took on the regulation for consumer credit in April, she added. Brokers who sign up to the facility will not need to apply for individual FCA approval to offer their clients premium finance.
Smith told Insurance Times: “If they start a relationship with us inevitably they may look to start their own in-house firm. We all know if you do not have finance you are limited to what you can sell in the insurance market. Your business will be jeopardised.
“As a model it is not much different to the other main premium finance houses so in a sense we are going to be going head to head, but in some other ways will not be head to head.”
Flexibility of Bexhill offering
The new proposition by Bexhill will not ask brokers for a minimum volume of business; it will apply to both personal lines and can last for a period of three to twelve months.
Under the new arrangement, Bexhill will pay the premium to the broker who then pays the insurer, while the client will make monthly payments at 14.99% APR directly to Bexhill.
Smith said: “Effectively – we don’t care how small you are – come to us we can show you what we are doing and give you that flexibility.”
In the two months since Bexhill rolled out the direct lending facility it is now working with about ten brokers.
Bexhill currently works with 100 brokers who have an in-house lending facility, but Smith said Bexhill is planning to provide the direct facility to 300 intermediaries by the end of the year.