General Insurance Brokers
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1.
New measures to help small firms from FSA
2.
Training & Competence
3.
Complaints
4.
Payment Protection Insurance - Update
5.
Protection and general insurance
6.
General Insurance - Advised or Non-Advised?
7.
Goodwill - Reminder
8.
General Insurance Complaint – Importance of Warranties
Ladies & Gentlemen
Please find enclosed the latest compliance and industry news.
As usual, sit back and enjoy!
Kind Regards
ateb consultants
Which article applies to me?
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1.
New measures to help small firms from FSA
The Financial Services Authority (FSA) has announced it is introducing new measures to increase its contact with small firms. The aim is to help firms make faster progress in meeting the FSA's Treating Customers Fairly (TCF) initiative and to identify, more quickly, those firms most in need of regulatory attention.
Building on its current risk-based approach, the FSA is introducing an ongoing programme of structured visits and/or telephone assessments to test the quality of management and progress towards embedding TCF. The results will help update its risk profile of individual firms so that it can better target resources at the firms that pose the biggest risk to its objectives. The FSA expects to carry out full on-site visits to approximately a quarter of firms in order to verify the assessments and follow-up identified issues.
| Ateb view: |
| We see this as a benefit to those firms who are trying to do the right thing and treat their customers fairly. |
| Action required by you: |
Ensure that your TCF plan is up to date and ongoing improvements are documented.
The FSA has already set a deadline of end-December 2008, by which time it expects all firms to be able to demonstrate that they are treating their customers fairly. |
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2.
Training & Competence
The FSA admit that the T&C Sourcebook has become increasingly complex as its scope has expanded and some of the more detailed provisions are legacies from the rulebooks of previous regulatory bodies. Subsequently, the FSA have removed some of the more prescriptive requirements and replaced them with a more user-friendly format.
| Ateb view: |
| Less guidance means greater chance of getting it wrong – sorry to be so negative! |
| Action required by you: |
| None – We will make updates to the web based ATEB manual. Although we don’t envisage making many changes because we would rather not fix something that isn’t broken. |
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3.
Complaints
There are changes to the FSA complaint handling rules that take effect on 1st November; the key areas are shown below:
- The 5 day acknowledgement letter deadline has been removed and replaced with a requirement to ‘deal promptly’ with a complaint.
- The 4 week holding letter deadline is being removed and replaced with a requirement to ‘keep the complainant reasonably informed’.
- Firms don’t need to display the FOS sticker but must inform the customer earlier in the process about FOS (via a firms terms of business / IDD) and when acknowledging a complaint.
- The FSA want all complaints to be resolved within 8 weeks as standard, except where this is not practical for reasons beyond the firm’s control.
| Ateb view: |
| Welcome the changes but would still recommend that existing timescales are maintained. |
| Action required by you: |
We will make updates to the web based ATEB manual.
Please note that in our experience, numerous complaints extend beyond the 8 week deadline – firms will now need to act promptly on receipt of a complaint to gather investigation material. |
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4.
Payment Protection Insurance - Update
This article outlines findings from the recent FSA review of the sales processes and systems and controls relating to the sale of payment protection insurance (PPI). They visited 126 small firms as part of this work, focussing on three sectors:
- motor retailers;
- loan brokers; and
- mortgage brokers.
This latest phase aimed to test the industry against five key outcomes. The outcomes the FSA were testing were that customers are:
- told that PPI is optional, where this is the case;
- given clear information about the product and what it will cost;
- given the assistance they need to be clear about what they are eligible for under the policy, and what the exclusions are;
- where advice is given, recommended a policy that meets their needs; and
- offered a fair refund if they cancel their policy.
Key concern areas:
- Over a third of small firms failed to clearly explain the PPI product, including significant exclusions and limitations.
- A third of firms did not ensure that the customer was eligible to claim against the product.
- Less than a third of statements of demands and needs reviewed were appropriately tailored to the customer.
- For single premium policies, less than a third of customer files could evidence that the policy met the customer's demands and needs.
- In a third of small firms, there were inadequate systems and controls in place around the sales process.
Overall the FSA were not satisfied that firms were treating their customers' fairly when selling PPI.
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5.
Protection and general insurance
ICOB is being revised. However the changes will not take place until January 2008, after which there will be a transition period.
For general insurance business, such as household, motor or pet policies, this means moving to principles and high-level rules, except where detailed provisions are required by European Union Directives.
For protection products (Payment Protection Insurance (PPI), critical illness cover, income protection and term assurance), the FSA is proposing a small number of additional rules carefully targeted to improve selling practices in areas where consumers are losing out.
Some of these new measures will apply to all protection products, for example, a new standard to ensure balanced oral disclosure to help consumers make informed purchasing decisions. One of these - a requirement for firms to provide information on price orally to the customer where a discussion takes place - will have particular impact on PPI markets, and some measures will apply only to PPI, such as extending the cancellation period from 14 days to 30 days.
| Ateb view: |
While this will mean more flexibility for firms, the FSA will require the same standards of conduct and essential consumer safeguards to remain.
Less prescription could however mean a greater chance of getting it wrong. |
| Action required by you: |
ATEB will update its web based manual with relevant changes, although, you may wish to read through the various papers.
http://www.fsa.gov.uk/pages/Library/Policy/CP/2007/07_11.shtml |
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6.
General Insurance - Advised or Non-Advised?
Clearly, it is important your customers are left in no doubt about the level of service they receive when you discuss general insurance products with them.
Often however, when we examine files as part of our file checks it is not always apparent whether clients have received advice or just information. We often see conflicting information for example the firm appears to be making a recommendation in once sentence but includes the phrase “you choose”.
You need to make sure if you are working on an advised basis that your paperwork reflects this and your firm should monitor this on a regular basis.
| Ateb view: |
| Firms are paid well for giving advice and should avoid phrases such as “you choose”. This normally results from insufficient questions (a lazy process) being asked. Firms should therefore consider improvements to their fact find process. |
| Action required by you: |
The fact sheet can be found at:
http://www.fsa.gov.uk/pubs/other/factsheet_sales.pdf |
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7.
Goodwill - Reminder
You should note that the transitional period for including ‘Goodwill’ as part of your capital resources requirements will expire on the 14th January 2008. After that date you must come into line with other intermediaries and will need to have established alternative funding.
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8.
General Insurance Complaint – Importance of Warranties
A broker was dealing with a claim from the Client following a fire that destroyed their processing factory. The client had been insured for various risks with the broker over a number of years.
During this period the insurer had applied a number of warranties to the cover for the client. The warranties meant that the client had the responsibility to ensure that certificates were in place to prove that care had been taken to check electrics and health and safety requirements were met. In addition to these warranties there was a restriction on the use of a portable heater.
The source of the fire was investigated by a third party and reported back to the insurer. However they withheld this information and turned down the claim on the basis that the warranties and statutory requirements had not been met on 4 counts.
As you can imagine the broker fought the client's case as best it could under the circumstances, however they could not defend the warranties not being met. This outcome was discussed with the client and the broker explained that there was nothing else they could do.
You know what’s coming next don’t you ….. ?
A written complaint then arrived to the effect that the broker had never made the client aware of the warranties and in fact the client claimed that the broker had told them that the warranties didn't apply to them.
The broker responded to the client's complaint after investigating the circumstance fully and refuted all their claims. This resulted in the complaint being forwarded to the Ombudsman for consideration (the client’s turnover was under one million in the claim period, although it was over in the previous year.)
The broker awaits a response from FOS.
| Ateb view: |
| This case promotes the importance of highlighting any warranties, exclusions, restrictions or constraints of the policy not only on a face to face basis but documenting these within the demands and needs statement letter or report. |
| Action required by you: |
| Think about your sales process and documentation that backs up the negatives and the downsides to any advice – you may wish to make changes. |
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Important Note:
The ATEB Newsletter is intended to provide general guidance on areas of compliance and T&C; however it is not a replacement for the main Rules and Guidance contained within the FSA Handbook.
We welcome all feedback. If you have any feedback or questions relating to any articles then please direct them to your local ATEB consultant or the newsletter editor Steve Bailey email steve@atebconsulting.co.uk
Unless you have consulted specifically (as part of a regular visit) with ATEB on a particular issue then ATEB Consulting accept no liability for any actions taken based on the information contained solely within the newsletter. |
Contact Us:
Ateb Consulting
The Old Post House
29 Nedderton Village
Northumberland
NE22 6AX
T: (01670) 822984
M: (07703) 576951
E: steve@atebconsulting.co.uk
W: www.atebconsulting.co.uk
