Drawing the line on caveat emptor
MONEY MARKETING - 17TH MAY 2007
The issue of caveat emptor has come to the fore again. The FSA has made it clear that firms will be responsible for giving consumers all the information they need to make an informed decision.
FSA supremo John Tiner, said: "Increasingly, consumers will be educated to take responsibility for their own actions and while the regulator does not want to lessen the protection it affords them, it is also aware of the role they can play to protect themselves." It has also expressed concern about the way firms give consumers information. No longer will it be possible to put everything into the mountains of documentation they send out at the expense of explaining things verbally.
Which? recently highlighted problems faced by travel and protection policyholders who find they are not covered when they come to make a claim.
Unless potential potholes are flagged up at the point of sale, many consumers drive straight into them when they try to make a claim.
The challenge across the insurance sector remains to provide a sufficient level of information in a digestible form. This will enable a balance over what can reasonably be expected from both parties.
The problem for the regulator is in where to draw the line when it comes to assessing complaints and whether providers or consumers must bear ultimate responsibility.
It is difficult for a consumer to plead ignorance and claim they were unaware of a warranty policy, for example, when it has been showing up on their bank statement for the past 24 months.
Similarly, where no mention has been made orally or in written communication of policy exclusions, providers may find it hard to defend their decision to turn down a claim.
How the regulator deals with the incidents which fall between these two stools will be interesting. As it pushes the pendulum of caveat emptor towards consumers, it must be aware of the problems it will create if it goes too far.
One wonders how long it will be before fashions change again and the FSA seeks to regulate the products sold, rather than the outcomes achieved.
Simon Burgess Managing director, British Insurance Limited
