Planet Insurance
Welcome to Planet Insurance - the new monthly column dedicated to examining topical issues from a range of perspectives.
By the time this article is published, the Law Commission should have published its next set of consultation papers. But, it is unlikely that any proposals will reach the statute book because, on 'Planet Government', this happens only if there is a major political issue at stake. That said, the consultation is bound to influence insurers and the debate on Treating Customers Fairly (TCF) more generally - for example, with the Financial Ombudsman Service and the Financial Services Authority.
Non-contestability periods will not go away and it is only a matter of time before a company launches explicitly what already happens in practice - a five-year period for unlinked, non-fraudulent non-disclosure. When this happens, a new competitive market will open up, followed by combinations of shorter periods and linked and unlinked non-disclosure. The impact on IFA business will be significant.
On the plus side, it really will be selling peace of mind. On the negative side, 'churning' after the expiry of the period, or even close to it, will be very dangerous. Consumers will, effectively, be locked into deals after quite a short time.
Also significant will be the consultation on agency status. It is clear that direct-sales forces will be acting for insurers. But what of multi-ties? It is fair to suspect they will be regarded as acting for whichever insurer the consumers' contract is with. As for untied IFAs, they may be regarded as acting for consumers.
Whatever the outcome, there will be a shift in insurer/adviser/consumer relations. IFAs will need to fight their corner to make sure they do carry all the responsibility when things go wrong - with no power to stop this happening in the first place. A familiar issue already with unsigned applications and non-disclosure.
Richard Walsh is former head of health and protection at the Association of British Insurers. He now works for SPPR Consulting
