Independent broker blog: Compliance, regulation

It seems to me that I can’t now remember a time “pre-regulation”; first we had GISC, a voluntary code of conduct and then subsequent regulation from the FSA.

At the time, I can re-call a series of seminars and briefings from the world and his wife; insurers, software houses and third party consultants all preaching fire and brimstone with regard to compliance and forth-coming regulation by the FSA, I can even remember sharing a few beers with some “older” brokers, who, after listening to the impending doom and gloom after just such a briefing were looking to off-load their business to anyone in the bar at the time who might have the cash available to buy!

We are all now some years further down the line and whilst I like many others had my concerns at the time, after all no one likes change, I can't see now what all the fuss was about.

I am not opposed to regulation, far from it, I’ve spoken before in a previous blog of how important it is for my business to distinguish itself from the larger “mass-produced” offerings and therefore place a greater emphasis on the demands and needs of our clients and treating customers fairly.

We offer an advised sale and do not sell on the basis of assumptions, regardless of whether the client is deemed to be “private” or “commercial”. I always find it mildly amusing that I am allowed to adopt a different approach to my commercial customers who are to be considered more knowledgeable in matters concerning terms & conditions, rules & regulations, in my experience there are none more knowledgeable about insurance than your average man in the street!

What I am opposed to is those organisations that use their interpretation of FSA regulation to suit and justify their own actions and therefore impose greater restrictions on our ability to perform a function and service for the insurance buying public.

We’ve experienced many instances where insurance companies have made it very difficult for us to obtain claim experience or a comparative quote, when attempting to obtain new business, regardless of whether or not we have written authority from the client and we’ve also experienced the complete reverse.

We’ve experienced underwriters who, after hearing from us, the holding broker, that the renewal is under attack are only too happy to make an alternative offering via an alternative intermediary in order to protect themselves at our expense.

When questioned we are always told that they are merely being compliant and treating customers fairly, well, regardless of whether it is an FSA ruling or not we now insist that we are also treated fairly and only look to develop relationship and rapport with those underwriters that are looking for the same in return.

The current financial crisis highlights the difficulties the FSA has in regulating the diverse offerings of the financial services market. Clearly there is a need for an individual IFA to be regulated in a different manor to that of an internet broker, high street bank or major insurer. I read with interest that the FSA continue to review the activities of the comparison web-sites and whilst they acknowledge that some improvements have been made more are needed with regard to an “assumptive” sale.

If my staff sold on the basis of assumptions we would be found out during the audit process or fail to maintain adequate loss ratio’s, one of the insurer's key performance indicators, who audits the online providers? If all your business is generated by an “assumptive” sale surely you should be regulated differently to those that provide an advised sale.

Regulation to ensure a fair deal for all is a good thing; it should maintain confidence in the financial system, promote public understanding of the financial system, secure the appropriate degree of protection for consumers and reduce the risk of financial crime.

Regulation for the sake of regulation is not a good thing, it will do nothing more than increase the cost to the end user.

I understand that the FSA has completed a review of its income requirements for 2009/2010 and how it proposes to obtain that income. All three bodies (FSA, FOS and FSCS), will require in excess of £700m additional income and I also understand that my contribution will increase by between 19% and 25%.

This I think confirms what we have feared all along that those of us with sensible business plans and expectations will end up paying for the mistakes made by larger, less regulated, financial institutions.

Peter Smits is managing director of Ashbourne Insurance.