A UK premium finance provider has criticised the
recently announced deal between rival Premium Credit Ltd and the national network of independent brokers,
Broker Network.
Ravi Takhar, CEO of Bexhill UK, part of the Orchard Funding Group, told Insurance Business that the deal highlights issues with the
premium finance industry in the UK, adding that there is a wider problem on the horizon.
“PCL’s deal with Broker Network marks another desperate attempt to increase business volumes to compensate for the loss of large clients to Close Brothers over the last 12 months,” Takhar said.
“The rates that are being offered are now very low and every broker needs to ask themselves who is actually benefiting from this. In the short-term, this will [benefit] the owners of Broker Network and Broker Network brokers, as they will simply increase their commissions without passing on the lower rates to their clients,” he went on to say.
According to Takhar, there is a wider medium-term problem looming “for the whole premium finance industry.”
“The commissions earned by brokers for premium finance business are simply not sustainable. Commissions of over 100%-1000% of the lenders charge are not uncommon and simply not fair. If the rate from PCL is low, say 2.45%, and if a broker provides finance at 4.9% to its customer, the broker is actually charging 100% more than the net rate from PCL,” Takhar explained.
“To put this into context, a broker earning 100% commission in any other market is simply unacceptable. This practice has already been criticised and changed in the car finance industry, where car dealers and brokers are no longer earning such commissions and should also no longer be acceptable in the insurance premium finance industry,” he went on to say.
Insurance Business reached out to Broker Network but it did not wish to comment.
What do you think? Is there an issue with the UK’s premium financing industry? Let us know by leaving a comment below.
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