Brokers are being left in the regulatory firing line
POST MAGAZINE - 29TH NOVEMBER 2007
Although changes are to be introduced to the insurance conduct of business rules next month, it strikes me that insurers are doing very little to become compliant or even understand the proposed reforms.
After its usual round of consultation and discussion, the Financial Services Authority will be pushing forward its move towards a more principles-based regime, although the rules are set to get tighter in the payment protection insurance sector – reflecting the regulator’s concerns over the market.
The big problem for brokers working in the area at the moment is lack of support they get from underwriters, and it is brokers who will be bearing most of the brunt of regulatory responsibility.
There is to be an increased focus put on eligibility, and it is going to be imperative for brokers to really understand the needs of their clients and the ins and outs of each policy they sell to make sure it is suitable.
Historically, underwriters have used a series of rating questions to band clients. This is all very well, but unfortunately it does not work particularly effectively when it comes to ensuring eligibility.
It is still possible on numerous websites to go through the online questionnaire and end up being sold a policy where it is impossible to make a full claim. Why underwriters have not taken the time to change this remains a mystery and seems to smack of a flagrant disregard for compliance; and surely some will be sanctioned before too long.
In the meantime, brokers who have relied on the underwriting question to form the basis of their client interview will have to make significant changes – or they are likely to end up misselling policies to clients and then be charged when confronted by the regulator.
It seems incredible that underwriters are not being more proactive not only to offer the best service and product to clients, but also to help their brokers sell their policies properly.
Instead it seems that too many are happy to sit back, allow brokers to bear the full brunt of regulation when it comes to selling the insurance and continue to make good out of clients that pay the premium, but do not have a change of claiming on the policy.
The rule changes come into force in December and there is then a six-month transferral period. Very few look set to be ready by December, and the worry is that things will look the same come the summer.
Simon Burgess
Managing director
British Insurance
