Elliott Hayes, Close Brothers Premium Finance’s commercial sales director, explains how the premium finance provider is helping brokers ahead of the FCA’s final deadline for its general insurance pricing reform
How is Close Brothers working with brokers to ensure they are prepared for the incoming rules, effective from 1 January 2022?
These are far reaching reforms and while the major broking firms have access to in-house compliance and regulatory advice, smaller brokers don’t.
Close Brothers Premium Finance (CBPF), which partners with 1,600 brokers in the UK that serve a total of 2.7 million consumers and 300,000 businesses, provides support to all brokers - especially smaller brokers that are concerned about the impact of the FCA’s reform on their business and want to do the right thing.
For example, for pre-contractual disclosures, we will support brokers with providing the customer with a price comparison showing the total cost of the policy with or without retail premium finance and make the difference in total costs clear.
What challenges are premium finance firms experiencing with the FCA reform?
Our key priority is ensuring our broking partners are fully aware of the impact of the reform and are prepared for their implementation.
The new rules create a more transparent sales process and promote higher standards of governance across insurance and optional additional products, including premium finance.
The challenge lies in providing the right level of support in consideration of the fact that these rules are not aimed directly at premium finance providers.
How is Close Brothers working with brokers to help them understand the new product governance rules?
As a principles-based regulator, the FCA does not define fair value, but it is in essence about the relationship between quality and cost.
When determining whether premium finance provides fair value, the FCA has said: “All premium finance provides the benefit of spreading payments and there are often no other benefits - we expect that price is likely to be the most significant factor.”
Brokers must do their own fair value assessments, but we want to work with them to develop a new process for responding to broker requests, setting out the information we can provide to support fair value assessments and details we can offer to assist with premium finance product approvals.
Brokers have until 30 September 2022 to perform assessments.
What do new rules on reporting, such as the pricing information report (PIR), mean for brokers and premium finance providers?
The PIR requires firms to report certain data about motor and home insurance policies, add-on policies and retail premium finance to support the FCA’s supervision of the market, help it to identify customer harm and to monitor compliance with the pricing remedy.
Brokers must submit the first report on or before 31 March 2022 for the period 1 January 2021 to 31 December 2021 and thereafter, the report is due annually on or before 31 March for the preceding year.
CBPF has already been asked for support from brokers to compile their reports and, as a result, we will create and document a process setting out what support we can provide, when and how we will do that.