8:25 am, October 16, 2024
The Financial Conduct Authority (FCA) has launched another investigation into the motor finance industry, with attention now turning to the insurance sector.
The body is currently reviewing whether drivers are getting a fair deal when borrowing to pay for vehicle insurance.
The competition market study also applies to people buying home insurance and has been launched alongside a new Government ‘motor insurance taskforce’.
At present, premium finance allows people to pay for insurance in instalments.
However, the average yearly rate on the amount of money borrowed is now standing at between 20 and 30%, leading to concerns from the FCA that packages are not offering fair value.
It is estimated that more than 20 million people pay for their insurance this way and FCA research shows that more than three quarters (79%) of adults in financial difficulty have used the product.
The study’s will include scope to review whether packages represent fair value, how well customers are made aware of their financing options, the role of commission, and other potential barriers to effective competition in the motor and home premium finance market.
The announcement comes as the Government has announces a taskforce, which includes the FCA, with the aim of identifying any actions that may stabilise or reduce motor insurance premiums, while maintaining appropriate levels of cover.
The FCA’s role will include analysing the causes of increased insurance costs, looking closely at claims costs, reviewing claims handling arrangements and studying the factors impacting different types of claim.
The regulator will also analyse the impact of rising insurance prices on different customer groups, such as younger and older drivers and those from ethnic minority backgrounds or on lower incomes.
The work ensures that the automotive industry will be keeping the FCA busy for the foreseeable future, as its investigation into the mis-selling of finance deals rumbles on.
Reacting to the latest development, Graeme Reynolds, director of competition at the FCA, said: ‘People rely on premium finance to spread their insurance costs by paying in smaller monthly payments.
‘We want to ensure that competition works well and make it easier for consumers to find the best deals.’
