A widely unknown directive coming into effect in October will force intermediaries to comply with regulation, despite the fact they are not coming under Financial Services Authority (FSA) scrutiny until January 2005.
As the DMD will come into effect before general insurance regulation, which will also cover this piece of legislation, it effectively brings forward the date for some of the regulatory requirements, said Nick Kirwan, marketing director for protection at Scottish Widows.
Kirwan warned that awareness of the DMD is relatively low and warned that this lack of knowledge could lead to mis-selling.
“Intermediaries who are not aware of the pending legislation could, in theory, find themselves in breach of the rules. Luckily, the gap between the implementation of the Distance Marketing Directive and general insurance legislation is a fairly short one,” he said.
Kirwan is also concerned that the FSA may – when taking over regulation in January – look at what advisers have done retrospectively. If this should happen, intermediaries who have not complied with the DMD rules during the in-between period pre-regulation could then be caught out, he said.
An FSA spokesperson however, denies this would be the case. He said: “Insurance intermediaries will not become regulated for insurance mediation until 14 January 2005, and we accordingly have no power to compel compliance with our rules, including those implementing the Distance Mediation Directive, until that date.”
Kirwan believes the DMD will probably add extra work for most intermediaries rather than just those who are conducting some, or most, of their business at a distance. He explained this is because providers will have to treat all business as being conducted in this way as it will be impossible for them to know how advisers sold the policy in the first place.
“Nevertheless, companies that primarily transact business through websites, will be the ones mostly affected,” said Kevin Carr, senior technical manager at LifeSearch.
