If there is one thing to say about financial services, it is that life does not stand still for long...
If there is one thing to say about financial services, it is that life does not stand still for long. In fact, up there with technology and IT, it is probably one of the fastest moving industries.
Therefore, it is not surprising that when a new regulator enters the scene, IFAs are less than enthusiastic. This has been especially so with the launch of the General Insurance Standards Council (GISC), the new regulatory body for the sale of general insurance. PMI, cash plans, waiver of premium and ASU will all fall under the remit of the GISC and IFAs wishing to continue advising on these products will have to submit their application by 15 October.
For many IFAs this will not be an easy decision. With the new regulator comes another set of membership fees, new minimum finance and professional insurance stipulations, training requirements and customer practice codes to satisfy. In other words, a lot of work for what probably accounts for a small proportion of your business.
Ultimately, IFAs have to decide whether the benefits of remaining in these markets outweigh the costs of satisfying the regulator. But instead of basing decisions on last year's business levels, it is perhaps better to consider the opportunities these products present. As our special report (pages 18-22) suggests, with the '1% world' approaching and as commissions continue to be squeezed, can advisers really afford to ignore these markets?
As more IFAs move towards holistic financial planning, access to as wide a range of products as possible will ensure advisers can recommend products that genuinely match their client's needs.
There are alternatives for IFAs not wishing to join the GISC and take on all the work it entails, but wanting to continue earning money from general insurance. Advisers, for example, can become appointed agents for member insurers enabling them to sell products on behalf of a member insurance company ' in effect, becoming a form of tied agent. Or, advisers can act as introducers and literally introduce products by passing on client details to the insurer, receiving a commission for successful cases.
Norwich Union Healthcare has already stated it will offer commissions to non-GISC members that introduce any of its PMI schemes, with contact details being passed to the insurer's sales team.
But IFAs owe it their clients to ensure they buy the most suitable product. Only with a full fact find and a thorough comparison of products available can advisers be confident they are recommending their client the best deal. And clients need advice to ensure they understand what their plan does and does not cover. This is where the IFA adds value to the sale.
Clients come to IFAs for independent advice. By acting as an appointed agent you can only offer advice on the products of one insurer, and by acting as an introducer you cannot even offer advice.
Both routes compromise the position of the IFA, that is, the ability to provide independent advice on any product in the market. There is no doubt that the GISC will bring with it the hassle usually associated with regulation. But for IFAs wishing to advise on PMI, waiver of premium, or indeed any other general insurance products and maintain their independence, there is no alternative.
