The Financial Conduct Authority’s (FCA) decision not to pursue new rules on premium finance has prompted varied commentary from industry experts, who emphasised the continued need for alignment with the Consumer Duty framework and fair value obligations.
In its latest Premium Finance Market Study Update, the FCA said it found no evidence to warrant market-wide interventions such as a single annual percentage rate (APR) cap, commission bans, or mandatory 0% finance. Instead, it will monitor firms individually and take action where necessary.
Michael Sicsic (pictured above, left), managing partner at Sicsic Advisory, said that the FCA chose not to impose sweeping reforms, instead opting to address practices behind closed doors.
“The regulator did not find enough evidence in the behaviour of insurance firms to justify direct market intervention,” Sicsic said, adding that any firm not providing fair value under the Consumer Duty framework could still face regulatory scrutiny.
He pointed out that practices such as ‘double dipping’ will not be banned outright. However, firms must be able to demonstrate an “objective and reasonable basis” for charging both interest and commission. Where this standard is not met, the FCA said it will intervene on a case-by-case basis.
Sicsic warned that firms with high APRs or complex commission structures may remain under review, even in the absence of new rules. “The FCA has made it clear: new rules are not forthcoming, but it will intervene decisively using the Consumer Duty framework wherever harm is identified.”
Hannah Swain (pictured above, right), head of UK personal lines pricing, insurance consulting and technology at WTW, said the update will allay fears among insurance providers of major interventions in premium finance.
“The update reiterates that practices need to be aligned with existing FCA rules and guidance outlined within Consumer Duty,” Swain said. “This includes the requirement to provide customers with fair value and a clear understanding of insurance and credit products.”
She added that WTW will continue to work closely with the industry to support navigation of any updated guidance.
The FCA’s measured approach to premium finance follows earlier findings that rising insurance premiums are largely driven by external inflationary pressures, including repair costs and parts supply issues. The regulator had previously signalled concerns about inconsistent claims handling, valuation practices, and oversight of outsourced services.
Stakeholders including the Association of British Insurers (ABI) and the British Insurance Brokers’ Association (BIBA) have indicated plans to continue engaging with the FCA to ensure consumer-focused practices, particularly in areas where customer understanding of policies remains limited.
With the FCA choosing to act through supervision rather than new regulation, industry participants are being reminded that compliance with Consumer Duty remains a core consideration for firms seeking to meet regulatory expectations.
Does this approach strike the right balance between regulation and flexibility? Share your thoughts in the comments.
