ABI to tackle premium finance charges
Members of the Association of British Insurers (ABI) have announced a raft of new principles to manage premium finance charges.
Premium finance charges are the fees applied to policyholders who pay for motor insurance monthly.
The ABI announced a series of steps to tackle increasing motor insurance premiums in February, with premium finance among the issues it was focussing on. It has now unveiled Premium Finance Principles to underline what fair practice should look like.
The five elements of it are: transparency – providing a price comparison between monthly and annual payments; affordability – reflecting the fact that many consumers can’t afford annual payments; fair value – premium finance income should be considered against core premium income; proportionality – charges should be relative to the cost of the service; and accountability – charges should be regularly reviewed.
Mervyn Skeet, director, head of general insurance policy, said: “The principles announced are one of a raft of actions we are taking to tackle the cost of motor insurance, which we know is putting pressure on households, especially those on lower incomes. We are doing all that we can within our reach as a trade body for insurers and hope that other organisations involved with premium finance follow our lead.”
“We’re also looking to investigate policy steps that could help low-income households specifically, as well as deliver on our broader Roadmap to tackling costs. This includes a call on the government to reduce insurance premium tax (IPT), especially when they are bringing in record tax revenues as a result of higher prices.”
