Introduce changes or face the consequences
FINANCIAL ADVISER - 6TH DECEMBER 2007
Despite the fact that changes are being introduced to the insurance conduct of business rules soon, it strikes me that very little has been done to understand the proposed reforms, or make alterations to be complaint with them.
After its usual round of consultation and discussion, the FSA will be pushing forward its move towards a more principles-based regime, although in the payment protection insurance sector the rules are set to get tighter, reflecting the regulator’s concerns over the market.
For brokers working in this area, the big problem at the moment is the lack of support they are getting from underwriters, despite the fact that 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 understand the needs of their client 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 possible on numerous websites to go through the online questionnaire and end up being a sold a policy under which it is impossible to make a full claim. Why underwriters have not take 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.
However, in the meantime many brokers who have relied on the underwriting questions to form the basis of their client interview will have to make significant changes or they are likely to end up selling the wrong policy to clients and will be charged as guilty when confronted by the regulator.
Simon Burgess
Managing director
British Insurance.
