Independent broker blog: One more big kicking for the banks!

At first glance, I must say that I was glad the banks lost the high court ruling, as an independent insurance professional I am and will always be more than happy to see those larger, faceless corporations be exposed for ‘bad practice’, especially ones where insurance is non-core business.

It strengthens our hand within our local business community and amongst the local residents and will keep us in our jobs long after some other new type of distribution channel is unearthed to again signal the ‘death of the broker’!

I was even happier to hear the likes of consumer champion Martin Lewis demanding that banks have their general insurance licences suspended in the wake of this latest high court ruling.

Not that I am in favour of fuelling the claim and compensation culture, but one less competitor for us on the high street wouldn’t be a bad thing, especially ones that tend to use commercial insurance as a bargaining tool with their banking customers, creating a very uneven playing field.

After allowing myself a few moments of optimistic star-gazing into the future without our banking rivals, it suddenly dawned on me that this may not be the silver-lined cloud I was hoping for after all!

Who’s going to end up paying for the even greater numbers of miss-selling claims? Well, in its current format, and if last year was anything to go by, the banks won’t be on their own helping to fork out the millions in compensation – the brokers will help play their part with our FSCS levies.

The announcements a week or two earlier about the reduction in fee increases for the forthcoming year – from 56% to 16% – was a welcome respite to the initial knee-jerk reaction from last year and at the time it was being commented that the FSCS had overestimated the volume of potential PPI claims.

Well if the flood gates hadn’t been opened last year, they have been well and truly blown out of the water now!

And the worst part of it all? We’ve never, ever sold payment protection insurance, not even via our premium finance providers. At least if we had, we could have the satisfaction of digging out the old files, routing through the papers and attempting to defend ourselves against the onslaught of compensation claims.

Still, at least we haven’t incurred any extra work for the privilege of paying increased fees – we just sit back watch those who have fail. Smaller IFAs and mortgage brokers could face insolvency and then we pick up the pieces.

And what is Sainsbury’s thinking?

While on the subject of banks, I note with interest that last month RBSI announced that they are in advanced discussions with Sainsbury’s Finance over a proposed five-year deal to provide the underwriting, claims management and sales and service support on new car insurance policies sold under the Sainsbury’s Insurance brand.

We’ve all known that RBSI and its various components has been up for sale for over two years now, but the proposed tie-up with Sainsbury’s and the length of the deal is all the more strange following the confirmation that the bank’s insurance assets are to be sold in the second half of 2012.

I would assume that Sainsbury’s could ill afford to be tied into a deal with an uncertain future and that given the hasty exit from personal lines by NIG, you can only conclude that RBSI is keen to position itself with a heavy bias toward direct writing ahead of the sale.

Having already dipped their toes, I wonder then if Sainsbury’s has sensed an opportunity to start flexing its none to insignificant financial muscles and expand its influence in general insurance?

Peter Smits is managing director of Ashbourne Insurance.