Barbara's blog: Closing the regulatory circle. At last!

I knew, of course, that the ABI had created a voluntary code of good practice for aggregators way back in 2009. And that Biba had uttered their concerns in 2008. Then I read of the FSA conducting a review of the same subject a year ago - giving the aggregators until August this year to respond. So, with a bit of luck and a following wind, the customer may finally be able to place their insurance with more confidence with aggregators (if that’s what they want to do) at least three years after the hierarchy of regulation decided they should investigate the matter. Wow, glad everyone is taking this so seriously!

Now, I’m all in favour of every party to a business equation having time to think and prepare reasoned answers, but why can this industry of ours react so amazingly fast to tsunamis and earthquake and flood, yet sit around twiddling its proverbial thumbs for year after year on a business issue that affects the customer so directly?

I read with interest the observation that the purveyor of insurance should not be able to pass the onus to the customer for detailed adherence to small print. Well, going back a few years - even before the IIB was established - the going rule was that the onus was on the insurer to ask the right questions and providing answers given were honest and to the best of the customer’s knowledge, the onus fell fairly and squarely on the insurer.

If an aggregator believes that they can get all the information they need to rate a risk in 30 seconds or less (to take the point of one particular TV advertisement), then they must take the flak if they haven’t established some fundamental fact, rather than relying on the small print. And they should pay the claim accordingly.

Equally, a few years ago now, there was a grand debate about the declaration on the bottom of a proposal form (remember them?). The debate was about the definition of ’material fact’. Has this industry progressed or what?

The ABI comment that they hope that this FSA activity will lead to a code of conduct being adopted for aggregators. When will this happen? Is 2012 or 2013 too optimistic?

Meanwhile, there are a lot of fat cats out there earning big salaries contemplating the future of this distribution channel year after year. In 2010, Beachcrofts commented (doubtless in less time than it takes to swing a fat cat) that the aggregators, as we know them, have a two or three-year life cycle, with the likely prognosis that wholesale merger will result in only several healthy and wealthy aggregators surviving.

I’d go one stage further and predict that aggregators as we know them are on their way out, so is there a point to all this activity if the industry is going to issue guidelines with, doubtless, 12 or 24 months to comply - when by that time there aren’t any aggregators left?

Of course, I am pleased that the aggregators will have to comply and take TCF seriously - as all insurance brokers do. Doubtless it will add to their cost of operation, which may just level the playing field a little and serve to offer some contribution to the unfairly biased fees and levies that insurance brokers have to pay to assuage the sins of others.

I would have used the expression ‘squaring the circle’, but the dictionary defines that as achieving the impossible. So, living in hope and optimism I prefer to use ‘closing the regulatory circle’ as my theme!

Barbara Bradshaw is chief executive of The Institute of Insurance Brokers (IIB).