In some cases FCA review found that interest rate fees and APR charges were not always provided
Insurers and brokers are failing to provide customers with clear information about the different payment options available when arranging premium finance.
The FCA also found that the annual percentage rate was not always provided or given sufficient prominence.
If a firm is providing regulated credit or is acting as a credit broker, they are required to provide a representative example setting out the interest rate, any fees or charges, an APR and the total amount payable.
However, the FCA found a number of cases where this was either not provided or the example did not include all of the required information, potentially limiting a customer’s ability to make an informed choice about how to pay, the regulator added.
The study also found that in some firms the APR charged was as high as 75%.
The FCA’s thematic review of premium finance focused on the online sale of home and car insurance and followed the customer journey up to the point where purchasers were required to input their payment details.
The review which took place between October 2014 and January 2015 included 13 insurers and 30 insurance intermediaries, including four price comparison websites.
The regulator found that the information about the overall cost of paying for insurance was not always clear or easily understandable.
The FCA said this meant that consumers could struggle to compare the difference between paying upfront or in instalments and in some cases would not realise there was a price difference between the two.
In a statement today the FCA said: “The review also identified a wide range of APRs, highlighting the importance to customers of having appropriate information to be able to compare pricing and understand the impact that the cost of finance has on the overall cost of an insurance product.
”Our work has identified that many firms in the market have more work to do in ensuring that they provide appropriate information to retail general insurance customers to enable them to make informed decisions.
“It also reveals the need for many firms to continue to work to ensure that their information disclosure to customers is fully compliant with our Principles.”
FCA acting director of supervision Linda Woodall added: “Consumers should expect clear information about the payment options available to them.
“Regardless of whether people choose to pay upfront or in instalments, it’s important that they can see exactly what they are signing up for and how much it costs so they can decide whether they are getting a fair deal.”
The FCA also found:
- An adequate explanation of a proposed credit agreement was not always provided sufficiently early in the customer journey to enable customers to make informed decisions
- Firms acting as a credit broker did not always disclose the name of the credit provider or details of their relationship with the firm
- In some cases it was not made clear that a fee would be charged.