The selling and administration of general insurance scrutinised
The Financial Services Authority (FSA) has outlined its approach to general insurance regulation prior to the regime coming into force in October 2004.
The consultation document, CP160, lays out the regulator's proposals on the selling and administration of general in- surance. Responses to this consultation paper should be received by 10 March 2003.
Proposals include a require- ment that, if a firm is giving advice, a policy is recommended that is adequate to the customer's needs. It also proposes firms provide inform- ation to customers on the services they provide in an understandable format, and that customers get key product information at a time when it can influence their decision-making.
Commenting, Ron Wheat- croft, technical manager at Swiss Re, said: 'An immediate thou- ght was that the document needs more clarity in its grouping of products. It has grouped together income protection and ASU policies, for example. This is a little confusing. However, the regulator's proposal for product adequacy, rather than suitability for clients' needs, suggests a relatively prop-ortionate approach.'
He added: 'Within the report there is a theme that suggests the FSA welcomes networks. Certainly regulating networks and other large organisations will be much better than regulating thousands of high street firms, which I do not think they have the capacity to do. The document seems reasonably proportionate and does bring a consistency with the investment regime.'
The document also contains the FSA's views on disclosing commission, an unfair induce- ments rule and cancellation periods. A training and comp- etence regime is discussed, as are complaint proposals, and access to the Financial Ombudsman Service.
The FSA has also published draft rules on proposals for changes to the appointed representatives regime, CP159, which currently applies only to investment business. It gives mortgage and general insurance intermediaries the option of becoming appointed represent- atives, as an alternative to direct authorisation.
Existing rules restrict an appointed representative of a product provider to one principal, or its marketing group. Under the proposed new rules, appointed representatives will be allowed to have more than one principal, subject to certain conflict of interest restrictions.
Charles Ansdell, corporate relations manager at IFA Inter Alliance, said: 'The removal of this rule would open out the capability of IFAs to link up with third parties across the board, both as appointed represent- atives and as other parties' principal. It would be a fantastic move for IFAs.'
Responses to CP159 should also be received by 31 March 2003.
