In addition to applying for permission to undertake regulated consumer credit activities, some motor finance firms and dealers may need to have permissions in relation to regulated insurance activities.
The Insurance: Conduct of Business Sourcebook (ICOBS) came into force in January 2008 (and replaced the insurance: Conduct of Business Rules) and apply to:
- insurance intermediaries;
- insurance providers; and
- motor vehicle liability insurers.
In the motor market, some of the relevant insurance products regulated under ICOB include:
- payment protection insurance (PPI);
- guaranteed asset protection (GAP) insurance;
- return to invoice (RTI) insurance; and
- some breakdown, recovery and warranty products.
FCA authorisation for general insurance is needed by firms and individuals if they either sell directly or act as an intermediary for these products.
Motor dealers who are not authorised for general insurance cannot even discuss or comment on regulated insurance products and it is a criminal offence to conduct any business which is defined as “regulated” in the Regulated Activities Order, which was made under the Financial Services and Markets Act 2000.
There is a cost to finance companies and motor dealerships to apply to become FCA authorised.
The penalties which the FCA can impose on firms for non-compliance are severe, ranging from heavy fines to the restriction of business practices, for example a complete ban on a company's ability to advise on and sell insurance products.
Firms which undertake regulated activities in relation to insurance should already hold the necessary permissions: firms entering this market will need to make sure they apply for the appropriate permissions before commencing any regulated activity.