General Insurance Brokers
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1. Preparing for TCF assessment visits – FSA Roadshows
2. FSA TCF Telephone Meeting
3. FSA website launches new ‘Financial Promotions’ web pages
4. Security of customers' data
5. Appointed Representatives – Are you including them in your RMAR?
6. FSA training – Reminders
7. Review of the Client Assets Sourcebook (CASS)
8. New Insurance Conduct of Business Sourcebook (ICOBS)
9. FSA provide General Insurance Resource Library
10. Are you documenting ‘Optional’ additions to the main policy correctly?
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.
Preparing for TCF assessment visits – FSA Roadshows
As you know, the FSA is rolling out a programme of inspection visits to assess firms’ progress towards TCF. They have been in Northern Ireland recently and, next up, is the North West.
Please note that the FSA is holding free roadshows in advance of visiting any particular region. They say that firms will not have to travel more than 50 miles to attend and that the programme will cover the whole UK. The roadshows will be held approximately 12 – 14 weeks before the assessments. The FSA will write to firms that are due for assessment and will often be in a region for three or four days giving firms a choice of roadshows in more than one location.
The content of the roadshows is as follows.
- All firms will take part in an opening session covering principles-based regulation and TCF.
- Firms will then move to their allocated breakout group to work though specific TCF issues that may affect their firm.
- The roadshow will end with a closing session for all firms, bringing together key messages and issues emerging from the breakout groups.
The roadshows will be run by the FSA’s Small Firms Division. A Head of Department will lead the opening session and the breakout sessions will be run by Managers and Associates from the Mortgage, General Insurance and Investment departments.
| Ateb view: |
Very useful initiative from the FSA |
| Action required by you: |
Watch out for the invitations and book your slot ASAP. We suggest that attendance is vital. |
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2.
FSA TCF Telephone Meeting
The following notes are extracts from a telephone meeting between an advisory firm and the FSA. The meeting lasted just over an hour and was established to monitor their progress towards TCF; to start the process, an email was sent to the firm requesting the following:
- Key Procedures
- TCF ‘Gap Analysis’
- Compliance Audit Report
- Structure Diagram
- As the firm was a GI Broker, they wanted a copy of the firm’s Conflicts of Interest policy
The meeting was via a conference call facility involving 2 FSA staff. The FSA used a checklist of issues, however they conducted the interview in a conversational style. The questions revolved around the following areas:
Years trading & market place
They will ask about your recruitment selection process and how TCF is embedded with new staff members. You should be able to demonstrate strong leadership and a well managed TCF culture.
You should be able to explain how you manage / assess training needs
- Monitoring & File Checking
You should demonstrate that you are monitoring a robust risk based spread of business via your file checks.
You need to explain that you are using it and that this is documented.
They showed a specific interest in individual pure protection and personal accident & sickness policies.
- How TCF manifests itself into the firm
We suggest thinking through this one in advance and have some sort of standard answer that encompasses everything from T&C to your Sales Process. We would recommend using the ATEB ‘6 Outcomes’ document as a prompt. They are looking for you to demonstrate that you have considered how TCF fits into your firm and that you can demonstrate you have conducted a gap analysis. You should also be able to show that you are adopting the practices you highlighted within the GAP.
They will ask whether you use a compliance consultant and their levels of service. They are also likely to ask which FSA events you attended in the last 18 months?
| Ateb view: |
Worth covering, but frankly, no surprises! |
| Action required by you: |
Speak to ATEB if you are still unsure as to what the FSA will expect. |
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3.
FSA website launches new ‘Financial Promotions’ web pages
If you conduct financial promotions (adverts) then you should add the link below to your website “favourites”.
In particular, points worth noting are that the new pages include:
- A case study section with examples of issues where the FSA have taken action and why. These will be added to on a regular basis.
- Facts and figures on how the FSA regulates financial promotions and how often the FSA take action. This will be updated on a quarterly basis.
- A Thematic section for forthcoming reviews
| Ateb view: |
The FSA has completely restructured the pages so that firms can easily find important and practical information to help them with their advertising and communications. |
| Action required by you: |
You can access the FSA’s new financial promotions website at:
http://www.fsa.gov.uk/Pages/Doing/Regulated/Promo/index.shtml |
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4.
Security of customers' data
With personal data being bought and sold by criminals who use it to steal identities and commit other crime, the FSA is understandably concerned that firms have effective systems and controls to prevent data being lost or stolen.
It’s therefore important that firms frequently review their controls to stay alert to new threats.
During 2007 their Financial Crime and Intelligence Division did a thematic review of data-security controls, visiting 39 firms, including 20 small firms. They found that poor data security is a serious, widespread problem across the entire industry.
They concluded that shortcomings fall under three broad categories:
- firms not appreciating the gravity of this risk;
- firms lacking the expertise to make a reasonable assessment of risk factors and devising ways of mitigating them; and
- firms failing to devote adequate resources to the problem.
The FSA has published a specially designed factsheet for small firms. The factsheet contains practical tips and examples of good practice.
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5.
Appointed Representatives – Are you including them in your RMAR?
Did you know that information about Appointed Representatives must be included in your RMAR Returns? For example, AR staff details should be included in the T&C section and figures for business generated should be included in the P&L.
Here are some general action points that the FSA recommends for RMAR
- Take responsibility for the RMAR. Senior management and owners of firms have overall responsibility for the accuracy of the RMAR, even if they delegate its completion to others.
- When delegating responsibility for completion of the RMAR, ensure the person has enough understanding of what is needed and is competent to complete it accurately.
- Ensure you keep a copy of all documentation used to support the entries on your RMAR submissions as you may be asked to verify what you have included.
- Take advantage of the help available from the FSA rather than estimating or guessing your answers. In the first instance, use the help boxes within the RMAR and the assistance on the FSA website.
| Ateb view: |
RMARs are a prime source of monitoring information for the FSA, so you should ensure that your returns are accurate.
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| Action required by you: |
If in doubt, discuss with your ATEB consultant. There is also useful online training available from the FSA (see article in this newsletter). |
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6.
FSA training – Reminders
There is some useful online training material available on the FSA website.
Retail Mediation Activities Return
Essential training for staff who complete RMARs.
http://www.fsa.gov.uk/Pages/Doing/training/rmar.shtml
Financial resources – calculating own funds and capital resources
This is a comprehensive guide to help you understand how to calculate regulatory own funds and capital resources. You will find out why compliance is important, how to make calculations relevant to your firm type, and how to proceed if you find you have lower financial resources than are required.
http://www.fsa.gov.uk/Pages/Doing/training/financial_resources.shtml
Client money (for general insurance intermediaries)
The client money rules are complicated. This will help you to understand the client money section of the FSA Handbook (CASS 5). The Guide to Client Money for General Insurance Intermediaries is also essential reading for staff whose jobs include client money in any way.
Course: http://www.fsa.gov.uk/Pages/Doing/training/client_money.shtml
Guide: www.fsa.gov.uk/pubs/other/Client_Money_Guide.pdf
The following is a half day workshop with a small choice of locations:
Financial promotions (for the investment sector)
This workshop is designed to provide practical help to firms, giving you an understanding of the FSA approach to financial promotions so you are equipped to review processes within your firm.
http://www.fsa.gov.uk/pages/Doing/training/fpromsinv.shtml
| Ateb view: |
None - for information only. |
| Action required by you: |
Incorporate into your training & development plans as required. |
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7.
Review of the Client Assets Sourcebook (CASS)
The review and consultation paper will be of interest to Investment or General Insurance intermediary firms that handle client money.
The FSA intends to simplify the structure of CASS following the implementation of the Markets in Financial Instruments Directive (MiFID). When MiFID was introduced, the CASS expanded from five to eight chapters and applied two different regimes, depending on whether firms conduct MiFID and/or non-MiFID business. This has made the sourcebook unwieldy and coupled with a disparity in regulation with the MiFID chapters non-MiFID chapters the FSA has decided to simply things.
CP 08/06 provides detail regarding the proposed new structure of CASS. The CP also explains that during Q1 2009, the FSA intends to undertake consultation specifically in relation to CASS 5 which sets the client money regime for general insurance intermediaries. Their objective will be to incorporate the client money rules for general insurance intermediaries into a single client money chapter within CASS.
By way of example, some areas the FSA will look to address are:
- CASS 5.5.30 R contains a requirement that firms obtain clients’ informed consent regarding the treatment of interest. The FSA intends to clarify this term and provide a ‘glossary’ section to their revised Guide to Client Money which will be distributed to firms following the restructuring of CASS 5.
- Most Firms with Appointed Representatives favour the immediate segregation approach set out in CASS 5.5.19 R. The FSA proposes to review the periodic segregation provisions to determine whether these can be altered to allow firms greater flexibility and choice in segregating funds.
- The FSA confirmed that many firms do not understand that if they hold more than £30,000 in a statutory trust account, then an audit is required. They feel that poor awareness may be attributable to the fact that the rules are in SUP rather than in CASS, where most firms would expect to find them! I guess it seems logical to move them into CASS.
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8.
New Insurance Conduct of Business Sourcebook (ICOBS)
A ‘sourcebook’ is what the FSA lovingly calls the rule book. As you might imagine, there are quite a few of them! ICOBS covers the general insurance conduct of business rules and is, therefore, one of the most important ones for you.
The new ICOBS sourcebook replaces the previous ICOB. We’re not sure what the next incarnation will be called – ‘ICOBS 2’, ‘Son of ICOBS’, ‘grandson of ICOB’, ‘Return of ICOB’, ‘ICOBS meets Godzilla’ – suggestions on a postcard please.
Anyway, the thrust of ICOBS is that the FSA has simplified many of the rules that affect you. For example, the 21 day rule for issue of renewal documents to retail customers has disappeared to be replaced by a catch all rule for both retail and commercial, requiring issue of documents ‘in good time’. Of course, the FSA does not define ‘in good time’!
Oh, and by the way, retail customers are now called ‘consumers’!!
The point we’re making in this article is that while the FSA is diluting some of the rules, they still expect firms to implement suitable standards. So, using the example above, we would suggest that issuing renewal documents for retail customers (consumers) within 21 days is a good standard and most firms have integrated this into their systems. Changing this process now would cause disruption and loss of control.
| Ateb view: |
If it isn’t broken, it doesn’t need fixing! Leave things as they are.
|
| Action required by you: |
There is a six month transitional period and the FSA expects firms to meet the required standards by 6 July 2008.
ATEB clients will receive more information on the changes that affect you in the form of a bulletin that will be issued over the coming weeks. Your ATEB consultant will then work with you to implement any changes. Relevant sections of the ATEB web based manual and toolkit will be updated to reflect changes. |
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9.
FSA provide General Insurance Resource Library
Trying to find information on the FSA website can, to say the least, be difficult. They are constantly moving documents from one part of the site to another and even some of the links on their own newsletters are now out of date!
Indeed, although we have tested the links included in this newsletter, we cannot guarantee that they will remain accurate in the future.
Anyway, did you know that their website includes a library of useful documentation?
This is one of the more useful parts of the site where useful resource documentation is archived periodically. You can find out information about such topics as Conflicts of Interest and Appointed Representatives. It also includes access to all previous newsletters.
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10.
Are you documenting ‘Optional’ additions to the main policy correctly?
Are you confident that you are justifying, explaining and confirming optional extras sold alongside other insurance? Are you happy that they are being explained in a clear, fair and not misleading way?
Do you use phrases in your Demands and Needs statement such as “Motor Legal Assistance membership scheme is included in your renewal premium” (without explaining that it comes at an extra cost) or “the premium shown also includes £22.05 for legal protection cover” (without explaining that this additional extra cover is optional)?
Remember, these optional extras are in most cases, separate contracts of insurance. As such, their justification must be demonstrated to the customer in the same way as the primary insurance – are they needed to match the client’s demands and needs requirements?
In this case, the price, the choice of insurer, etc, should be explained and justified for the optional extras.
| Ateb view: |
The FSA has already conducted reviews on this topic and findings were not favourable. It is something they will look for during visits. |
| Action required by you: |
Consider these comments and take appropriate actions. We suggest that you look for instances where optional extras have been sold, as part of your file checking. |
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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
