Emma RadmoreThe ABI has announced a new set of Premium Finance Principles, designed to try better to manage the charges on consumers who pay monthly for motor insurance. The ABI says it considered, and discussed with the FCA, a possible voluntary cap on premium finance charges, it has decided instead that the principles it has now published both comply with competition laws and are a basis on which firms can take meaningful action. The principles are:
- transparency – so consumers clearly see the difference between paying annually and paying monthly, and can see clear and up to date information about the average premium finance charges insurers impose;
- affordability – insurers should be aware that those opting for finance do so because they cannot afford to pay annually up front and therefore the additional charges for paying monthly will hit them hardest;
- fair value – including considering how income from premium finance compares to income on the core premium;
- proportionality – so that charges are reasonable relative to the costs of both the insurer providing premiums finance or it being provided by other means such as credit card; and
- governance and accountability – so that senior management is responsible for ensuring charge levels remain appropriate.
The ABI will report by summer 2025 on the impact of the principles.