Close Brothers Premium Finance (CBPF) has published a new guide for their broker partners to help them navigate the FCA pricing and fair value reforms. Seán Kemple, CBPF managing director, said the guide is a response to requests for information from brokers selling personal lines insurance who want to make sure they are well-prepared for the new regime when it comes into force at the beginning of 2022.
He said: “Although the FCA changes do not impact us directly, and have been well-trailed, smaller brokers in particular are asking where to get more information so they are fully prepared for January.”
He said that many smaller brokers don’t have in-house compliance and regulatory teams, and were looking instead for external support. He noted that, as a bank, Close Brothers is itself highly regulated so understanding the regulatory landscape is a core business skill.
“As the pioneer of premium finance for insurance broking forty years ago, CBPF has weathered lots of regulatory change, so we have anticipated the new pricing regime and have already begun to think about the next changes around Consumer Duty, which are scheduled for next summer.”
On the new pricing rules, Seán explained that CBPF has compiled answers to several of the most frequently asked questions the business has fielded from brokers during the past few weeks and has focused the guide on four key areas – changes that will apply to “price walking”, product governance and renumeration, pre-contractual premium finance disclosures and regulatory reporting.
Seán added that CBPF has also arranged a webinar for its broker partners. The webinar will be run by Grant Thornton on 7 December to provide further insight and commentary on the reforms and what brokers need to be prepared for next year.
“Nearly 75% of our broker partners recently told us the information we provide to them to help them navigate regulatory change is good, but we want them to rate it as excellent It’s incumbent on us to continue to make premium financing as customer focused as we can creating good outcomes and great customer experiences. That’s the win-win for customers, brokers and providers like us.”
Turning to the impact on brokers, Seán said that while brokers are already obliged to act in a customer’s best interest when proposing and arranging premium finance new obligations from the FCA include:
· Enhanced pre-contractual disclosure of premium finance at the point of sale, including stating that using premium finance will be more expensive than paying for the insurance upfront.
· Brokers needing to consider how they offer fair value to all personal lines insurance customers over the longer term.
· Reporting certain data sets to the FCA so that it can check that the rules are being followed, including data on premium finance APR and fees.
· Senior managers in the brokerages confirming that their pricing practices comply with pricing rules where they will be held accountable through annual reporting.
Copies of the guide are available to all brokers who do business with CBPF.
Seán said: “We have sent the guide to all our personal lines broker partners. We know from our campaign stats the guide has been hugely popular. We are keen to do all we can to ensure our industry is fully up to speed with the changes and that implementation next year is hassle free, for brokers and their customers too.”
He added: “The whole industry needs to work together to navigate these changes effectively and in the best interests of customers.”