The FSA may well have the axe hanging over it’s head, be over-populated by a bunch of pen pushers and bureaucrats, culpable for the restriction in insurance products and markets available and be responsible for failing to avert the recession caused by the banks, but…….
Insurance Blog will be the first to admit that the FSA in it’s swansong is at least trying to do the right thing, with some notable recent successes in prosecutions and forcing the banks to heel over the mis-selling of payment protection insurance.
Those small insurance brokers, insurance agents, consultants and intermediaries whose rising FSA authorisation costs and annual fees have helped fund the Financial Services Compensation Scheme to pay for the banks mis-selling crimes would be the first to disagree, however their contempt for the organisation might be tempered some if they were aware of the FSA’s latest moves against their largest competitors……
The Insurance price comparison websites and aggregators selling general insurance products on the Internet.
If the FSA’s latest proposals for the regulated Selling of Insurance on the Internet are enforced, this could be a good thing for all small insurance intermediaries out there, who collectively currently receive less than 5% of the total internet traffic searching for Insurance.
First in the line of fire has been the Insurance price comparison websites, particularly those that compare car insurance and home insurance, and recommend insurance products to the public. In it’s investigation the FSA found serious breaches of it’s rules on the regulation of giving advice and selling of insurance. It subsequently wrote to 19 firms that it considers are breaking these rules in regards to advice and arranging contracts of insurance.
The letter advised the 19 Price Comparison websites:
· review your regulated activities and ensure you are appropriately authorised or otherwise exempt;
· ensure that you only enter into contracts with firms holding the appropriate authorisation and permissions to conduct that regulated activity (or who are exempt);
· withdraw your assistance from third parties if they are in breach of the general prohibition;
· review your disclosure documentation, sales procedures and your terms and conditions and make sure that these are compliant with all relevant regulatory requirements including our Guidance consultation Principles, ICOBS and the Unfair Terms in Consumer Contracts Regulations 1999. In particular, you should ensure they comply with requirements on: customer eligibility, status disclosure, advice suitability, providing a proper statement of demands and needs, and that you do not seek in your terms and conditions to exclude liability for the regulated activities you are undertaking; and
establish, implement and maintain adequate policies and procedures to ensure your firm complies with all relevant obligations under the regulatory system and for countering the risk of furthering financial crime, in particular breaches of the general prohibition and restrictions on financial promotion.
A price comparison firm may be arranging contracts of insurance where its activities involve any of the following:
· the firm provides links to product companies or intermediaries for the purpose of enabling the customer to purchase a chosen insurance product;
· the firm requires a pre-purchasing questionnaire to be completed in order to filter sales (i.e. where the intermediary asks a series of questions and then suggests several specific products.
Under these guidelines it would appear that any website that collects information with the view to arranging insurance or even provides a link, is breaking the FSA rules if not authorised to do so….
The FSA found the folowing types of Insurance websites in breach where they are not FSA regulated:
· the firm provides a comparison of the terms of different policies as opposed to a passive display of the features of different policies;
· the firm runs a website which is funded by one or more insurance or mortgage providers (i.e. it is not ‘independent’); and/or
· the firm offers a special discount on the product to its website users.
. Even where no financial benefit is derived, the firm may still be making arrangements if it brands the comparison service with its own name, endorses the service or otherwise encourages users to respond to it, negotiates special rates for users, or holds out the service as something arranged for the benefit of users.
Advising on insurance
The FSA now considers any type of recommendation as giving advice. In addition where the effect of the firm’s arrangements constitutes a recommendation to purchase a specific product or products, that recommendation is likely to involve the firm giving regulated advice.
Some indicators of where a website or price comparison website may contain advice which is regulated by law include:
· where the name or logo of only one insurance product is displayed on the website in a manner that suggests that the particular product is to be preferred over other products (for example, a particular logo might appear on a webpage containing generic advice on the merits of incapacity insurance contracts);
· where a particular insurance product is recommended as the ‘pick of the best’ product out of a number of other products in its category;
· where a particular insurance product is star-rated by a website, for example, the product is awarded five out of five stars, by contrast to a similar product which is awarded two out of five stars;
· where a scripted questionnaire gives a recommendation or opinion which influences the choice of insurance product and then goes on to identify a particular insurance or regulated mortgage product to which the advice relates;
· where the questioning process has resulted in the identification of one or more particular contracts of insurance based on a non-objective assessment of the product features;
· where the website generally makes any value judgement as to the merits of one or more insurance products or regulated mortgage contracts, by way of scripted questioning or otherwise;
· where generic best buy tables are used and are not populated from specific consumer information this might be advice depending on the consumer’s experience of it. So, for example, a website containing solely generic ‘best buy’ tables explaining the merits of futures as opposed to options would not be advice, but if those tables guide the consumer to a particular insurance product based on the consumer’s personal requirements, this is likely to be regulated advice;
· where generic statements on a website are not dependent on consumer information being populated; this could be regulated advice where they are displayed in such a way that the website operator is making value judgements as to the merits of buying, selling, etc. For example, ‘The products of the month are XYZ, ABC and DEF investments because they offer the best returns’.
Clearly if implemented to the full the following types of insurance marketing would be illegal on the Internet in the UK for all websites that are not authorised and regulated and will have huge ramifications for the way insurance is distributed online in the future:
· Linking of any sort to Insurance Provider or Insurance Comparison website (Text links and Banner ads)
· Distributing Articles and Media that link to or promote insurance products (Article Directories, Video Directories, Social Media, Blogs)
· Affiliate Marketing and Vertical Marketing by non regulated affiliates
· Review Websites
· White Labelled Websites
· Marketing Websites
Insurance Blog thinks that this is a good thing, if it is properly policed as it will remove a lot of the chaff from the Internet, much eminating from unqualified webmasters both inside and outside of the UK. We are of course authorised and regulated under our Insurance Publishing Group owners Insuretec Ltd. FSA no. 422934 and would love to see our FSA fees used in this way! And as a word of advice, when filling out an insurance proposal form online, no matter it’s detail, always check that the website states its FSA number and regulatory status, which can also be found at the FSA’s website.