UK Insurance Regulation Is Changing The Face Of The Market
In 2005, two years before the credit crunch, the British government imposed far reaching financial and structural controls over the
UK Insurance Market by bringing the sale of General Insurance into the controlling hands of the Financial Services Authority, the FSA. Legal regulation and authorisation for the first time of the sale of UK personal lines and commercial risks.
Anyone large or small who wishes to market and sell the majority of insurance products in the UK must be authorised and regulated by this very large Quango.
Prior to this the UK Insurance industry was self regulated through professional bodies.
Five years on, what has this meant to the way we buy Insurance as consumers in the UK?
The regulation has certainly had a large impact on the available distribution channels, with a contracting market and barriers to entry.
Although regulation came into force during a period of Insurance broker consolidation and aggregation coupled with skewed figures due to new entrants from the Internet, it appears that our old friend the high street broker is the one to have suffered the most.
The problem with metropolis style regulation is that there is no point having it unless you have enforcement.
The UK Insurance Industry likes to use the nice word compliance as a synonym for the cost.
This has breed a whle new industry in itself, outside of the additional thousands of pen pushing bureaucrats in the FSA.
Compliance, generating a whole new industry and wealth base....the compliance officer or consultant.
The problem is ... it hasn't generated any wealth has it?
Where's the money for all this compliance come from?
Out of the pockets of the Insurance companies involved!
And where do you think that money is going to be retrieved from?
Quite Right! Higher Insurance Premiums for me and You!
So what we initially thought might be a boring insurance story has turned out to be very intriguing.
What's happening in the world of compliance and Insurance Brokers?
we thought we'd catch up...........
Insurance Blogger Kris Oldland Reports...
Regulation and Compliance: FSA Fees a “burden on smaller firms” Says Institute of Insurance Brokers’s Bradshaw
I imagine that there are no small amount of
insurance brokers out there at the moment wondering what on earth they have done to upset the financial authorities so much.
First we see her majesties wonderfully efficient revenue and customs chaps getting it completely wrong with Insurance Premium Tax and piling unnecessary and unwarranted taxation on the broking sector. Probably too busy trying to doubling erroneous tax bills to pay to much attention to what the role of the humble broker is.
But like the pantomime baddy that tries to steal every scene in the show in wade the FSA to show these clowns in the HMRC that when it comes to completely missing the point and costing brokers a lot of time, money and emotions – they have the market cornered by proposing a minimum regulatory fee of £1,000.
As they have done so many times before they really seem to have tried so hard to do the right thing but somehow just managed to get it so wrong. The move to review the fees and levies structure is the correct thing to do, but it needs done in a considered and intelligent manner.
When will the FSA understand that sometimes a one size fits all approach to all things financial just doesn’t work. Sometimes that square peg just won’t fit into that round hole – no matter how hard you smash it with that sledge hammer.
Well they’re in trouble now because Barbara Bradshaw, chief exec of the IIB and defender of the humble broker has the FSA in her sights. For the record I think that Barbara is a wonderful and very likeable lady, that said I wouldn’t like to get on the wrong side of her either, she is also a very powerful and determined lady who strikes me as being able to achieve anything she puts her mind to.
Referring to the proposed minimum fee as ‘totally disproportionate’ Bradshaw went on to comment that the fees were likely to become a major ‘burden for the smaller firms’
She added “While we welcomed the FSA's commitment to review the fees and levies structure, we're nevertheless concerned that the proposals really do penalise the smaller broker. The FSA's proposed fee structure means many smaller brokers could face up to a 200% increase."
Showing a complete lack of understanding for the complexities of the broking community as well as fundamental disregard for the smaller brokerages the FSA have claimed in their consultation document ‘Regulatory fees and levies: policy proposals for 2010/11’ that "These proposals simplify and significantly increase transparency as it is clear what the minimum fee covers and why”
The document goes on to later state that the new system will “be fairer as the basis for calculating it will be the same for all firms." Again they are so close to getting it right aren’t they? Again the theory behind it sounds like it is ticking all the right boxes but the delivery is just far too heavy handed.
The biggest worry is if we get rid of this incompetent lot, who are on earth are we going to get to replace them? Part of me would say that its better the devil you know. Perhaps if they just started listening to people like Barbara, Eric Galbraith or even god forbid a few
insurance brokers, they may actually be able to make the leap from having good ideas to actually doing some good? But can we afford to give them the time to learn from there mistakes when their mistakes are costing us so dearly?
Sort ‘em out Barbara for all our sakes.
Labels: Compliance, Financial Services Authority, fsa, Insurance Brokers, Insurance companies, Regulation, The FSA, UK government, UK Insurance
FSA orders GBP 60 Million Mortgage Protection Insurance Repayments
More than a million UK householders are to get refunds on their recent mortgage protection insurance monthly payments, after the City watchdog, the FSA, forced PPI providers including giant firms such as Aviva and Abbey; to pay back over GBP60 million in increased
Mortgage Protection Insurance premiums, which were slapped on already cash strapped mortgage borrowers earlier this year.
Over 2.1 million UK consumers have policies to repay mortgages and loans with accident, sickness and unemployment insurance attached.
The major UK money lenders have had over 10 years of collecting premiums on inflated house prices, with very few claims. But with claims now rising due to the recession, they've been recently hiking up the rates on many of these policies to maintain their profit levels.
The Financial Services Authority (FSA) and
Mortgage Payment Protection Insurance (MPPI) firms have agreed an industry-wide package of measures for consumers, including refunds of around £60 million.
The industry has acted in response to FSA concerns over recent increases in premiums and reductions in what customers are covered for under their policy. The FSA’s concerns centred on the terms permitting these changes, and how clearly they were disclosed. The FSA expects its concerns to be addressed by the agreement reached.
Following discussions initiated by the FSA with relevant trade bodies and some firms, the industry has responded positively by agreeing to:
• proactively refund increases in premiums, and reverse any reductions in cover, for customers who have experienced these changes to their policy in 2009;
• offer to reinstate policies where a customer had cancelled it within two months of an increase in premium or reduction in cover made during 2009;
• freeze premiums and cover for existing customers for at least the remainder of this year
• amend Mortgage Protection Insurance contracts to ensure that all customers are made aware of the circumstances in which firms have the right to vary premiums and cover.
New contracts will mean customers get a fairer deal with two months' notice of any changes to enable people to
compare mortgage protection insurance products and switch mortgage protection if necessary.
Jon Pain, managing director of supervision at the FSA, said:
"The FSA welcomes this positive move by Mortgage Protection Insurance firms to reverse recent changes in premiums or cover which will put affected customers back in the position they were in before the policy was changed. It will also give all MPPI customers clarity about when and why firms will be able to vary these in future.
"This clarity will provide the basis for MPPI to remain a valuable option for many mortgage customers who wish to take out protection, alongside the mortgage commitment they are taking on."
The affected companies will contact customers if their policy is affected, and will make all refunds by the end of June 2010.
The Consumer Panel has also welcomed the announcement today of FSA action and an industry-wide refund on Mortgage Protection Insurance.
Adam Phillips, Chairman of the Financial Services Consumer Panel, said:
“This is exactly what a financial regulator should be here for and we applaud the FSA’s action. It cannot be right that firms change the terms and conditions of an insurance policy just as times get hard and when people are more likely to try to claim on it.
We note that this agreement is to freeze premiums and cover for existing customers until at least January 2010. We will be watching to see how the FSA ensures
Mortgage Protection customers continue to get a fair deal beyond this date. Significant changes to cover go against the whole principle of why people pay for insurance and undermine consumers’ trust in the industry.”
Labels: fsa, FSCS, mortgage, mortgage insurance, mortgage payment protection, mortgage payment protection insurance, mortgage protection, mortgage protection insurance, mppi, UK government
FSA fines Alliance and Leicester £7m for misselling Loan Protection
Alliance & Leicester has been hit with a record fine by the FSA of £7 million for serious failings in its telephone sales of Loan Payment Protection Insurance.
For three years from January 2005 to December 2007 A&L sold over 200000 Loan PPI policies to customers seeking a personal loan.
The FSA has said that there was a general failure by A&L advisers to give customers details of the true cost of their PPI. In addition A&L sought to find reasons to sell PPI without properly considering what customers needed.
A&L did not make it sufficiently clear that
Loan Payment Protection Insurance was optional and it trained its staff to pressurize customers where they queried the inclusion of PPI in their quotation or challenged independent financial advisers recommendations.
These failings resulted in unacceptable levels of non-compliant sales and a high risk of unsuitable sales over the three year period.
The FSA Director of Enforcement, said: “The failings at A&L are the most serious we have found. This is reflected in the record PPI fine. It is very disappointing that after three years of regulation we are still finding serious problems in PPI sales.
Firms cannot rely on paperwork sent out later as an excuse for unclear or misleading statements given on the telephone.”
Simon Burgess of British Insurance, one of the country's leading independent suppliers of PPI who has been campaigning against misselling for years said
"Although rather belated, we welcome the FSA's tough stance against anyone who mis-sells PPI."
Labels: Alliance and Leicester, fsa, loan payment protection insurance
Small Insurance Brokers at Risk as Banks fail
Small Insurance Brokers such as you might still find on your local high street are under further threat as the banks and building societies collapse the
Institute of Insurance Brokers has warned.
The
Association of British Insurers is reported to be furious with the way that the nationalisation of the Bradford & Bingley debt has been handled which has left UK Insurance Companies having to foot the bill of £14 billion to cover any losses under the FSA controlled Financial Services Compensation Scheme (FSCS).
If the FSCS has to pay out more than 1.84 billion per year then
insurance brokers and intermediaries will be asked to contribute more to the fund, to which they already pay a substantial amount each year in order to trade. This could well lead to more small insurance businesses going under - especially as we have not yet seen the last of the big fallers in the Global finance world.
This weekend the Belgium Government was trying to sort out another rescue package for troubled insurance company Fortis who have already received an 11.2 billion input from the Benelux governments. Fortis incidently had a large affinity scheme with Bradford and Bingley. Two other companies heavily involved with B&B were Zurich and Norwich Union.
Labels: Fortis, fsa, FSCS, Insurance Brokers
