Research: Law Commission paper cynical of brokers
One in eight consumer complaints received by the Financial Ombudsman Services (FOS) involve allegations about an intermediary.
According to the Law Commission's third insurance contract law paper, entitled 'Intermediaries and Pre-contract Information', research at the FOS, which looked at 190 consumer cases and 12 small business cases, showed that issues of agency arose in 25 of the consumer cases. A whopping 66% of business cases were also connected to a broker.
The paper, which examined the role of the intermediary and who they are acting on behalf of, argued that there is a "lack of understanding that exists among insureds regarding the role of an independent intermediary for disclosure purposes". It stated that in many cases where a complaint had been filed against an insurance company it should instead have been made against a broker. "It is, of course, possible in such cases for the complainant to raise a new complaint against the adviser rather than the insurer. However, the complainant will need to return to the very start of the complaints process and contact the adviser."
The paper added: "Although FOS procedures are outside the scope of our current review, we would hope that more could be done to assist consumers to bring complaints against the correct organisation, if necessary considering complaints in tandem where the status of an agent is disputed."
Commenting on the findings, Jason King, managing director of Torquil Clark Life Insurance, said: "I am not surprised by the research as it is too easy to inadvertently slip up if you aren't trained properly to get good disclosure and/or fail to have robust procedures in place. To date intermediaries have generally been let off the hook as it is very difficult to prove. Few IFAs record telephone calls or meetings and in the absence of this proof insurers are reluctant to pursue an IFA over a ND claim and destroy the working relationship they have with the IFA for new business. So insurers have to date carried the can themselves."
