Making clear the cost of Insurance premium finance provision to our customers For the first time, FCA has created rules that can impact the remuneration earned by insurance premium finance brokers. The new rules come into effect on 1 January 2022. FCA Rules PS21.05 were already in action since October 2021. Now lets us discuss the limitations for broker income. Limitations on financing remuneration ICOBS 6A.5.5 R states that a firm must not arrange any retail finance where this would not be in the customer’s best interests. Brokers may need to ask themselves the following questions. 1. Is the interest rate in the customer’s best interests? 2. Is there a conflict of interests resulting from the commission earned? 3. How does the arrangement selected provide a fair outcome for the customer? 4. Why was the financing arrangement selected for the customer?
Broker A earns a 15% commission from offering premium funding to its customers through a company. The insurer’s installment facility provides an Annual Percentage Rate