Latest news with #SarahPritchard
Yahoo
3 days ago
- Automotive
- Yahoo
UK's FCA cites external costs behind motor insurance premium hikes
The UK's Financial Conduct Authority (FCA) has found that rising motor insurance premiums are due to 'external cost pressures' and insurers' claims handling practices. The analysis also identified that the rising costs of vehicles, parts and labour, as well as car technology complexities and supply chains, have inflated the premiums. The regulator's report further notes an increase in the costs associated with vehicle rentals, theft-related claims and incidents involving uninsured motorists. It observed that referral fees paid to credit hire organisations and claims management companies have been linked to protracted claims processing and rising costs. The FCA has found concerning claims-handling practices in home and travel insurance, including poor supervision of third-party services, leading to delays and customer complaints and a lack of robust management information systems. It also noted that high rejection rates for storm damage claims, with only 32% resulting in payment, and cash settlements were often used without sufficient consideration of their suitability. The watchdog said it is engaging with the insurance companies identified as having poor practices and is prepared to take regulatory action where it is necessary. Sarah Pritchard, deputy chief executive of the FCA, commented: 'External cost pressures are primarily to blame for recent motor premium increases, not increased firm profits, but there is some more work to do on claims handling, particularly in home and travel. 'That is why we are stepping up – making sure claims are handled promptly and fairly and pushing for a coordinated effort to tackle the root causes of rising motor premiums.' This month, the FCA, along with the Prudential Regulation Authority and Lloyd's, agreed to streamline the approval processes for Lloyd's managing agents. "UK's FCA cites external costs behind motor insurance premium hikes " was originally created and published by Life Insurance International, a GlobalData owned brand. The information on this site has been included in good faith for general informational purposes only. It is not intended to amount to advice on which you should rely, and we give no representation, warranty or guarantee, whether express or implied as to its accuracy or completeness. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content on our site.
Glasgow Times
6 days ago
- Business
- Glasgow Times
Rules set to change for Klarna Clearpay and other BNPL firms
Under a consultation put forward by the Financial Conduct Authority (FCA) borrowers will also be able to complain to the Financial Ombudsman Service if something goes wrong. The rules, giving consumers more transparency over what this type of borrowing involves, would take effect when buy now, pay later (BNPL) comes under the FCA's remit next year. The new oversight by the FCA would mean that BNPL borrowers will have key protections that already exist for other types of lending. The FCA also oversees the Consumer Duty, which requires financial firms to put consumers at the heart of what they do, including when designing products and communicating with their customers. Sarah Pritchard, deputy chief executive at the FCA, said: 'We have long called for BNPL products to be brought into our remit, so people can benefit from BNPL while being protected. 'Our regulation will help consumers navigate their financial lives, with checks on whether they can afford to repay, support when things go wrong and access to the right information to make informed decisions. 'We're mainly relying on existing requirements, including the Consumer Duty, rather than proposing to make lots of new rules, supporting growth and allowing firms to innovate.' BNPL products are a way for people to spread the costs of purchases without paying interest. BNPL options regularly pop up at online checkouts. But concerns have been raised that some people could end up taking out loans that they cannot afford to pay back on time, incurring charges. According to the FCA's research, one in five (20%) UK adults – equating to 10.9 million – had used BNPL at least once in the 12 months to May 2024, up from 17% in 2022. In May 2024, 2% of UK adults (equating to 1.1 million) had £500 or more outstanding unregulated BNPL debt, and 11% of UK adults (5.3 million) had £50 or more outstanding, the regulator found. The FCA's consultation is open for feedback until September 26 2025. A temporary permissions regime will be open for firms to register two months before the regime comes into force on July 15 2026. Firms will then have six months from the date the regime comes into force to apply for full authorisation. BNPL is a broad term which can include some credit agreements that are already regulated, the FCA said. Its new proposals relate to unregulated BNPL agreements, referred to as deferred payment credit (DPC). The Government has made legislation to bring DPC products under FCA regulation. DPC refers to unregulated interest-free credit, which finances the purchase of goods or services and that is repayable in 12 or fewer instalments within 12 months or less. Lenders who only provide DPC do not currently need to be FCA authorised, leading to concerns that some borrowers may not be receiving enough information about what credit agreements involve. Alison Walters, interim director of consumer finance at the FCA, said: 'Our proposals are aimed at ensuring that consumers get good consumer outcomes and that there is an appropriate degree of consumer protection. 'And by that, we mean that consumers get the right information, in the right way, at the right time, so that they can make an informed decision about their buy now, pay later lending.' She continued: 'What we're asking in our rules is for firms to carry out an affordability check, to ensure that consumers are able to pay. And if they get into financial difficulty to provide them with an appropriate level of support. 'We also want them to give more information in relation to late fees, consequences if they miss a payment, and impacts, for example, if it may affect credit ratings. 'And also information about their withdrawal and cancellation rights.' She added: 'If something goes wrong, consumers will be able to refer their complaint to the Financial Ombudsman Service.' Ms Walters said that in terms of supporting those in financial difficulty: 'Under our existing rules, firms can offer forbearance to consumers if they get into financial difficulty.' She said that could include changes in the payment plan and people can also be signposted to debt advice or other support mechanisms. Ms Walters added that under the new rules 'we still think that this market will be viable and profitable'. She pointed out that the BNPL market has already grown in size and popularity. According to the regulator, DPC lending has grown from £0.06 billion in 2017 to more than £13 billion in 2024. Maxine McCreadie personal finance expert at UK Debt Expert advises caution: 'Buy Now, Pay Later can be a useful way to manage your money, especially for larger purchases where you've planned and budgeted. But regularly using it to buy smaller, everyday items could lead to financial problems. It feels like it's become too easy to delay payment without really thinking through the long-term consequences. 'One of the big issues is how BNPL is marketed. It's often positioned as something separate from traditional credit, which can make it feel less serious - but the reality is, it's still a form of debt. Miss a payment and you could find yourself facing late fees and doing damage to your credit score. 'New rules coming into force next July will mean that shoppers will have to pass stricter affordability checks before being approved for BNPL products, and I think that's a positive move. It brings BNPL more in line with other credit products, and should help people stop and think before clicking 'pay later' at checkout. 'Ultimately, it's about reminding people that these services do have a financial impact and encouraging them to make informed, considered choices rather than falling into a cycle of spending that could be hard to break.' A Klarna spokesperson said: 'After five years of constructive work with HMT (HM Treasury), we're entering the home straight to make BNPL regulation a reality – a major win for UK consumers. 'We're looking forward to working with the FCA on rules that protect consumers while keeping choice and innovation at the heart of the UK credit market.' A spokesperson at BNPL provider Clearpay said: 'We will support the FCA as it consults on and finalises its specific rules for the sector.' The spokesperson said regulation 'will establish a consistent operating environment and clear compliance standards for all providers,' adding: 'Clearpay research highlighted that nearly half of UK adults (48%) are more likely to use BNPL once regulation is passed, and with 71% believing that it is important for BNPL to be subject to UK financial legislation, today's announcement will help foster trust among consumers. 'It will also create a more sustainable foundation for the future of BNPL as it continues to grow as an everyday payment option for consumers.' Vikki Brownridge, chief executive of StepChange Debt Charity, said: 'It's incredibly reassuring to see the FCA's consultation on its proposed approach to regulating buy now, pay later.' She added: 'Whilst BNPL can be a useful budgeting tool, it can deepen debt problems, and it is important struggling consumers are afforded the same level of protection as for other forms of credit. 'Bringing BNPL firms in line with the wider credit market, when regulation begins next year, will provide an added layer of protections for consumers, a much-needed change as StepChange polling found that BNPL users are twice as likely as all credit users to borrow to cover essential bills, and our research also found that BNPL is now as common as using an overdraft amongst UK adults.' Vix Leyton, a consumer expert at app ThinkMoney, said BNPL 'can be a really useful tool, particularly when life throws you an unforeseen cost that drives a wrecking ball through your budget. 'But while spreading the cost can take the pressure off, it's temporary relief if it's not done responsibly and mindfully.' Recommended reading: She added: 'Proper affordability checks, in line with other credit products, are vital to stop people unintentionally kicking the financial can down the road, as is making sure that those in financially vulnerable positions understand the consequences of missed payments.' Rocio Concha, Which? director of policy and advocacy, said: 'Buy now, pay later can be a really convenient way to spread the cost of items, but because it is not yet regulated, it hasn't come without risk to consumers. 'Regulation will mean that consumers will be subject to affordability checks to ensure responsible lending as well as making sure they are given sufficient information about the credit they are taking on and the risk of falling into debt.'
Daily Mail
7 days ago
- Automotive
- Daily Mail
Car insurance price rises 'out of firms' control' says City watchdog
Soaring car insurance premiums are 'outside of firms' control' rather than being driven by insurer profits, the City regulator has said. The Financial Conduct Authority found that the cost of motor claims has been primarily driven by higher prices for cars, parts, labour and energy. The cost of hire vehicles, and the number and cost of theft claims, and uninsured drivers have also contributed to the rise. The average cost of car insurance premiums dropped 7 per cent in the first three months of 2025 compared to a year earlier, from £635 to £539, according to figures from the Association of British Insurers. However, premiums remain higher than two years ago when the average annual policy cost was £478. The FCA found that referral fees from credit hire firms and claims management companies had also pushed prices higher and contributed to slower processing. While the Government's motor taskforce, launched in 2024 to tackle the rising cost of car insurance, may help drive down premiums, the regulator said it would not prevent these kind of cost increases. The FCA also said that insurers across all sectors still needed to handle claims more efficiently. It said it had 'uncovered evidence of poor claims handling practices', particularly in the home and travel sector. This included just under a third of storm damage claims resulting in a payment, and what the FCA describes as 'insufficient management information'. Sarah Pritchard, deputy chief executive of the FCA said: 'Insurance provides peace of mind but people must be confident they can get a fair deal and be treated right when the worst happens.' Pay monthly insurance customers paying more Around 48 per cent of motor and home insurance was paid monthly in 2023, but customers could be paying higher premiums. The FCA report found that some firms that allow customers to spread costs and pay monthly rather than yearly were earning more money than the cost of providing the cover. Analysis found that the margins on these so-called 'premium finance' arrangements ranged between 14 and 62 per cent across insurers, intermediary lenders, intermediary brokers and specialist premium finance providers between 2018 and 2023. The regulator requires insurance premiums charged to customers using premium finance to be at the same level as those paying yearly, unless there is an objective and reasonable basis for the change. Some insurers say that the choice of payment method is correlated with the risk for those paying monthly. The FCA said: 'Where firms charge for premium finance, revenues appear to materially exceed costs for some providers. 'Whereas the profit margin earned on a core insurance policy may be relatively low, we see margins on premium finance that are somewhat higher. 'Different business models will have different ways of recovering costs. 'In some cases, they recover all costs through the insurance product itself, or recoup returns on lower margin insurance product through higher APRs [annual percentage rates].' As yet, the FCA will not introduce a cap or any other measures to encourage insurers to equalise premiums. Hannah Gurga, director general of the ABI said: 'Having the option to pay for insurance in monthly instalments can provide flexibility for those who need to manage their budgets. 'Offering this service does involve costs for insurers, and firms also have to keep cover in place for a period of time if a payment is delayed or missed. 'Our Premium Finance Principles, which we published last year, outline that any charges should be fair, transparent and reflective of the costs that the insurer faces. 'We'll continue to work with our members on this matter and engage with the FCA's review.'
Powys County Times
7 days ago
- Automotive
- Powys County Times
Regulator finds ‘concerning' evidence of poor handling of insurance claims
Insurers have been told by the Financial Conduct Authority (FCA) to improve their claims handling, following 'concerning' evidence of poor practices in some cases. The regulator said that, while rising motor insurance premiums are largely driven by external cost pressures, shortcomings persist in how some insurers handle claims. FCA analysis indicated that increases in the cost of motor claims – due to higher prices for cars, parts, labour, energy and more complex cars and supply chains – have contributed to premium increases. The cost of hire vehicles, the number and cost of theft claims and uninsured drivers have also risen significantly. This confirms that increased costs outside of firms' control, rather than firm profit, were the biggest cause of recent premium rises in motor insurance. But the FCA did identify that referral fees from credit hire firms and claims management companies were associated with slower claims processing and increasing costs. Where it has seen poor practice from firms, the regulator said it is addressing it directly with them, including taking action against specific firms where necessary. The regulator said that 'concerning' evidence of poor claims handling practices included a lack of oversight of outsourced services, resulting in poor customer outcomes, delays in settling claims and high complaint volumes. It also found evidence of insufficient management information, resulting in failures to promptly identify and resolve claims handling issues. Cash settlements were also being used in some cases without sufficient consideration of whether they are most suitable, the regulator said. The FCA also highlighted high rejection rates for storm damage claims, saying only 32% of such claims made to a sample of firms in 2024 resulted in a payment. The regulator is also providing evidence for coordinated action from Government, industry, and other regulators, as part of the Government's motor taskforce, to help drive down the cost of motor premiums. This could help limit cost increases but it cannot prevent them, the FCA said. It has also published an interim update of an ongoing premium finance market study investigating whether consumers receive fair value when choosing to pay for insurance in monthly instalments. While premium finance allows customers to spread costs, making them affordable and providing flexibility, the regulator has found some firms earn much more money than it costs to provide the service. It will explore these concerns further in the next phase of the study. The FCA said it will seek to tackle any issues it finds first through the Consumer Duty, publishing a final report by the end of 2025. Sarah Pritchard, deputy chief executive of the FCA, said: 'Insurance provides peace of mind but people must be confident they can get a fair deal and be treated right when the worst happens. 'External cost pressures are primarily to blame for recent motor premium increases, not increased firm profits, but there is some more work to do on claims handling, particularly in home and travel. That's why we're stepping up – making sure claims are handled promptly and fairly and pushing for a coordinated effort to tackle the root causes of rising motor premiums. 'A well-functioning insurance market helps consumers navigate their financial lives and supports growth by building people's resilience to financial and personal shocks.' The FCA also said that evaluation of previous pricing reforms showed they are having the intended impact on the price gap between new and existing customers in both the motor and home markets. This means its reforms were effective in curbing 'price walking' where loyal customers were charged more at renewal, the regulator said. Association of British Insurers (ABI) director general Hannah Gurga said: 'The FCA's findings confirm that record-breaking claims costs are behind recent increases in motor insurance premiums. 'They also demonstrate that many of these cost pressures – such as rising vehicle repair costs, part shortages and increased thefts – stem from issues beyond the industry's direct control, making collaboration essential to find sustainable, long-term solutions. 'Ensuring a smooth and stress-free claims process is crucial for customers when going through what can already be incredibly difficult circumstances. Our members work hard to achieve this, but we will engage with them and the regulator to understand what improvements can be made in the claims handling journey, to ensure good outcomes for customers and to support trust and confidence in the industry.' James Daley, managing director at Fairer Finance, said: 'As things stand, consumers continue to struggle to understand the differences between insurance products.' He added: 'But even if consumers manage to buy a product that meets their needs, they still have no reliable way of knowing whether the insurer will treat them fairly at claims stage. And the FCA's research shows that there is a wide difference in standards at this crucial moment.'
South Wales Guardian
7 days ago
- Automotive
- South Wales Guardian
Regulator finds ‘concerning' evidence of poor handling of insurance claims
The regulator said that, while rising motor insurance premiums are largely driven by external cost pressures, shortcomings persist in how some insurers handle claims. FCA analysis indicated that increases in the cost of motor claims – due to higher prices for cars, parts, labour, energy and more complex cars and supply chains – have contributed to premium increases. The cost of hire vehicles, the number and cost of theft claims and uninsured drivers have also risen significantly. This confirms that increased costs outside of firms' control, rather than firm profit, were the biggest cause of recent premium rises in motor insurance. But the FCA did identify that referral fees from credit hire firms and claims management companies were associated with slower claims processing and increasing costs. Where it has seen poor practice from firms, the regulator said it is addressing it directly with them, including taking action against specific firms where necessary. The regulator said that 'concerning' evidence of poor claims handling practices included a lack of oversight of outsourced services, resulting in poor customer outcomes, delays in settling claims and high complaint volumes. It also found evidence of insufficient management information, resulting in failures to promptly identify and resolve claims handling issues. Cash settlements were also being used in some cases without sufficient consideration of whether they are most suitable, the regulator said. The FCA also highlighted high rejection rates for storm damage claims, saying only 32% of such claims made to a sample of firms in 2024 resulted in a payment. The regulator is also providing evidence for coordinated action from Government, industry, and other regulators, as part of the Government's motor taskforce, to help drive down the cost of motor premiums. This could help limit cost increases but it cannot prevent them, the FCA said. It has also published an interim update of an ongoing premium finance market study investigating whether consumers receive fair value when choosing to pay for insurance in monthly instalments. While premium finance allows customers to spread costs, making them affordable and providing flexibility, the regulator has found some firms earn much more money than it costs to provide the service. It will explore these concerns further in the next phase of the study. The FCA said it will seek to tackle any issues it finds first through the Consumer Duty, publishing a final report by the end of 2025. Sarah Pritchard, deputy chief executive of the FCA, said: 'Insurance provides peace of mind but people must be confident they can get a fair deal and be treated right when the worst happens. 'External cost pressures are primarily to blame for recent motor premium increases, not increased firm profits, but there is some more work to do on claims handling, particularly in home and travel. That's why we're stepping up – making sure claims are handled promptly and fairly and pushing for a coordinated effort to tackle the root causes of rising motor premiums. 'A well-functioning insurance market helps consumers navigate their financial lives and supports growth by building people's resilience to financial and personal shocks.' The FCA also said that evaluation of previous pricing reforms showed they are having the intended impact on the price gap between new and existing customers in both the motor and home markets. This means its reforms were effective in curbing 'price walking' where loyal customers were charged more at renewal, the regulator said. Association of British Insurers (ABI) director general Hannah Gurga said: 'The FCA's findings confirm that record-breaking claims costs are behind recent increases in motor insurance premiums. 'They also demonstrate that many of these cost pressures – such as rising vehicle repair costs, part shortages and increased thefts – stem from issues beyond the industry's direct control, making collaboration essential to find sustainable, long-term solutions. 'Ensuring a smooth and stress-free claims process is crucial for customers when going through what can already be incredibly difficult circumstances. Our members work hard to achieve this, but we will engage with them and the regulator to understand what improvements can be made in the claims handling journey, to ensure good outcomes for customers and to support trust and confidence in the industry.' James Daley, managing director at Fairer Finance, said: 'As things stand, consumers continue to struggle to understand the differences between insurance products.' He added: 'But even if consumers manage to buy a product that meets their needs, they still have no reliable way of knowing whether the insurer will treat them fairly at claims stage. And the FCA's research shows that there is a wide difference in standards at this crucial moment.'
