OFT dismisses Sesame practices concerns
FINANCIAL ADVISER - 2ND JUNE 2005
Burgesses refers Sesame panel issue to lawyers following Office of Fair Trading’s decision.
Concerns raised by Burgesses over Sesame’s panel practices have been dismissed by the Office of Fair Trading.
Simon Burgess, managing director of Burgesses, a provider of accident, sickness and unemployment cover, complained to the FSA and the OFT over the IFA network’s seemingly multi-tied panel of protection providers.
Mr Burgess raised his concerns after finding his firm’s accident, sickness and unemployment did not figure on the panel, despite pointing out he topped Which? magazine’s best-buy table for mortgage payment protection insurance cover in July 2004.
However, John Holmes, principal case officer for the OFT, said in a letter to Mr Burgess that FSA regulations only state the principal “must specify the types of counterparty that the appointed representative may deal with” and that contracts with its providers could not be considered under the Competitions Act as these are legal requirements.
Mr Holmes said that for general insurance, product panels and the definition of the term ‘independent’ are not specifically regulated other than through the FSA insurance conduct of business rules.
He said: “These rules require a firm to ensure its communications with customers are clear, fair and not misleading. The Competitions Act does not oblige firms to deal with any specific supplier or customer, except in exceptional circumstances.”
Mr Burgess is determined to pursue the matter and has now referred the issue to his lawyers.
He said: “The most important thing here is to clarify ‘independent advice’. How can Sesame claim to be independent and be treating customers fairly if they are not allowing them access to the best advice? Sesame is simply extracting the maximum commissions from providers and that is pure greed”.
Charles Bryant, commercial director for Sesame said it made on claim of ‘independence’ in terms of its GI proposition. He said: “The Sesame GI proposition was determined in direct response to member feedback.”
“We have always made it clear that we will keep our GI propositions under regular review to ensure it offers appropriate products and is consistent with our members’ requirements.”
The FSA was not able to comment.
Burgesses' also revealed research suggesting brokers and IFAs could be losing up to £5 billion a year in commission by allowing banks and building societies to sell payment protection insurance to their clients. Mr Burgess said that calling clients directly could earn lenders thousands of pounds in individual commissions.
