Bank Charges on Client Premium Accounts
Tue Sep 15 2020
A number of members have contacted Brokers Ireland in relation to their Bank’s commercial decision to apply a negative interest rate on their client premium account once a certain balance is reached.
The Consumer Protection code does not prohibit fees and charges being applied to client premium accounts and Brokers should maintain a buffer amount to cover these charges.
Brokers Ireland would recommend that, firstly, members contact their banks to negotiate the negative interest rate to be applied. It is also worth noting that under the CPC, Brokers are permitted to operate more than one client premium account for the same form of insurance which may offer a solution in order to avoid reaching the balance for the negative interest rate to be applied.
For your reference, outlined below is an excerpt from the CPC outlining the requirements for operating the Client Premium Account:
- 3.46 An insurance intermediary must lodge money it receives in respect of a premium or a premium rebate to a segregated bank account. Each such account must be designated “Client Premium Account”.
- 3.47 An insurance intermediary must operate separate client premium accounts in respect of life and non-life business.
- 3.48 A regulated entity must ensure that all payments from a client premium account clearly state that the payment emanated from a client premium account.
- 3.49 A regulated entity must ensure that a client premium account is never overdrawn.
- 3.50 The following are the only debits and credits that may be passed through a client premium account:
- a) Credits (money in)
- i) money received from the consumer in respect of the renewal of a policy, which has been invited by an insurance undertaking, or a proposal for insurance accepted by an insurance undertaking;
- ii) money received from a regulated entity representing premium rebated for onward transmission to the consumer;
iii) transfers from another client premium account operated by the insurance intermediary for the same form of insurance;
- iv) transfers from the insurance intermediary’s office account to allow a ‘buffer’ amount to be maintained in the client premium account (any such transfers must be clearly identifiable);
- v) proceeds received from a regulated entity in respect of the settlement of a claim for onward transmission to the claimant;
- vi) bank interest, if appropriate; and
- vii) where mixed remittances are received, the total amount must first be lodged to the appropriate client premium account.
- b) Debits (money out)
- i) money paid to a regulated entity on foot of renewal of a policy, which has been accepted by an insurance undertaking, or a proposal, accepted by an insurance undertaking;
- ii) money paid to a consumer representing rebates of premiums received from insurance undertakings;
iii) commissions and fees paid to the insurance intermediary for which there is documentary proof that the funds are properly due to the insurance intermediary;
- iv) transfers to another client premium account operated by the insurance intermediary for the same form of insurance;
- v) payments of claims settlement amounts to a consumer; vi) bank interest, if appropriate;
vii) the portion of mixed remittances that does not relate to a premium payment. Such remittances should be transferred to, or to the order of, the consumer without delay; and
viii) payments in respect of charitable donations, in accordance with Provision 7.2.
3.51 An insurance intermediary must carry out and retain, on a monthly basis, a detailed reconciliation of amounts due to regulated entities with the balance on each client premium account it operates.
If you have any further queries, please contact Brokers Ireland Compliance Unit on firstname.lastname@example.org.