Shares in insurance firms Admiral Group Plc (LSE:ADM) and Direct Line Insurance Group PLC (LSE:DLG) slumped on Thursday as speculation arose of a regulatory clampdown on premium finance products
The insurance regulation chief of the Financial Conduct Authority described such products as “poor” in an interview with trade magazine Insurance Post.
FCA insurance head Matt Brewis dubbed the products as “a tax on being poor” and said regulator had “talked about it enough” in an apparent prelude to regulatory action.
Premium finance describes the market for loans taken out by individuals to help them pay for insurance policies. Demand has increased in line with the growing cost of policies.
“Those who are paying monthly are subsidising those who can afford to pay annually,” Brewis added.
His comments follow an open letter from the FCA in 2022 that said consumers were typically aware of premium finance costing more but were often unable to afford annual payments.
The FCA has also introduced new consumer duty rules, under which companies are obliged to prove they are providing fair value through products.
Shares in insurance companies slumped across the board today, with Admiral and Direct Line falling 5% and 6% on the news respectively.
Aviva PLC (LSE:AV.), Beazley PLC (LSE:BEZ), and Legal & General Group PLC (LSE:LGEN) slipped 1%, 2.4% and 0.8% respectively meanwhile.