View more on these topics

Ensure you are heard on insurance

In the November 11 issue of Mortgage Strategy, we had a quick look at the Treasury consultation paper on Regulating Insurance Mediation which had been released in October.

Now we look in more detail at the 14 questions posed and, as we did for CP146, have prepared a model response for you to download and send to the Treasury by this Friday, January 31.

The FSA&#39s CP 160 consultation on the selling of insurance, with a response deadline of March 10, has of course crossed over with this Treasury consultation. It is interesting to note the differences.

The Treasury talks about “general insurance”, whereas in CP160 the word “general” has been dropped and it refers to the “insurance” area, as distinct from the investment and mortgage areas.

I know claims handling will not be of great interest, but it is worth noting that both the Treasury and the FSA make it clear that claims handling on behalf of insurers will not be subject to regulation, though the FSA goes on to say that claims handling on behalf of clients may be subject to regulation.

On re-reading the Treasury paper, I did miss an interesting point first time through. On page 13, under the heading of “Misleading statement and practices”, it says that it is a criminal offence to “knowingly or recklessly make a false statement which is intended to induce (your client) … to fail to enter into a relevant insurance contract”. In other words, if you say to your clients that they should not bother taking out contents insurance, term assurance etc, then you are committing a criminal offence.

Strange, but true. In CP160, the FSA picks up on the theme, saying a risk factor for the consumer is that they do not buy a product they need. See the Regulation article in the January 13 issue of Mortgage Strategy for more on this.

Returning to the matter in hand, namely helping you respond by January 31, the questions in the Treasury paper alone amount to 585 words, so it is not possible to reproduce them in full on this page. You will need to download the response to consider them in detail. Here we have a rapid walk through the 14 questions, and focus on some of the more important issues for brokers.

Note that a lot of the questions are loaded by asking “do you agree ….”. If you don&#39t, you will need to submit a very convincing argument to get the Treasury to reconsider its position.

Questions 1, 2 and 3 relate to travel insurance, motorcar warranties and extended warranties on domestic appliances. Enough said.

Q4 asks if there are any other activities aside from advice and arranging an insurance policy which should be regulated. The obvious answer is no, even if you could think of one.

Q5 asks if you agree that claims handling by intermediaries on behalf of insurers should not be subject to direct FSA regulation. Obvious answer: Yes.

Q6 asks if you agree that the financial promotion regime should not apply to promotions for general insurance activities. Again, the obvious answer is yes.

Q7 relates to information provided on an incidental basis by professionals such as solicitors and accountants. See download.

Q8 is to do with Traded Endowment Policies and Viatical (what?) investments. Do not pass Go, do not collect £200, but move straight along to … Q9 asks if you agree that the appointed representatives regime should be extended to insurance sales. This is probably the most relevant and important question for mortgage brokers. See box.

Q10 again relates to information provided by professionals. See download.

Questions 10, 11, 12 and 13 relate to the Part XX regime for designated professional bodies, such as the Law Society and the Institute of Chartered Accountants, and the information provided by their members. See download.

Q14 asks for input on the likely costs and benefits to consumers and the likely impact on small brokers of the proposed insurance regulation. Difficult to know what to say; the Treasury makes it clear that to “do nothing” is not an option, as this would lead to infraction proceedings and fines by the European Commission. So regulation is going to happen, and don&#39t bother with those pleas to keep regulatory costs to a minimum as they are likely to fall on deaf ears.

All in all, this a seriously boring set of questions which hardly encourages you to respond.

But you will, in all likelihood, never get the opportunity again to make your views known on the high-level structuring of insurance sales.

Your splendid efforts in downloading the response to CP146 certainly moved Mortgage Strategy onto the radar screen within the FSA. Let&#39s do the same with the Treasury. Go to You know the routine.

Should AR cover insurance, too?

Question 9, para. 4.7, page 20:

Do you agree that the appointed representatives regime should be extended to insurance mediation activities? Would this cause significant consumer detriment and if so, how?

By way of explanation, the AR regime is a special dispensation in the FSMA 2000 whereby intermediaries can choose to become an AR of an authorised body, such as a network, rather than becoming directly authorised themselves.

The precedent of the IFA networks, relating to the advice and arranging of Investments, is that over 60% of IFAs choose to join one of the networks rather than be directly authorised.

Many of the smaller mortgage brokers are likely to down the same route and become an AR – but not if this meant that they would be prohibited from selling insurance.

So if the AR regime was not extended to cover insurance, then many small brokers may be disadvantaged in having to be directly authorised by the FSA with its attendant costs and compliance obligations. This may in turn force brokers out of the insurance market to the detriment of consumers who could be deprived of access to local advice and “whole of market” selection of suitable insurance products.

Answer yes if you want to keep your options open, or if you have already decided you do not want to be directly authorised by the FSA. Also add that it is more likely to cause consumer detriment if the AR regime was not extended to insurance sales.


GMAC Commercial Sets sights on UK

GMAC Commercial Mortgage Europe has launched an assault on the UK buy-to-let market with the opening of a new office in London&#39s West End. GMACCM Europe offers a range of services for the European commercial real estate industry including lending, equity co-investment and servicing. James Dalton, president of GMACCM Europe, says: “Our current pipeline is […]

Cost of ARLA Bond scheme cut

The cost of protection for landlords&#39 rents and clients&#39 deposits is set to fall by an average of 35% from the start of April for subscribers to the Association of Residential Letting Agents Bonding Scheme. The ARLA Bond provides cover of up to £2m, with no individual limits for either the public or member letting […]

Three-year stepped discount from Earl Shilton Building Society

Earl Shilton Building Society will launch a new three-year stepped discount with no extended tie-in on February 1. The product has a 1.95% discount for the first two years, giving a pay rate of 3.65%, followed by 0.95% discount for the following year, a pay rate of 4.65%. There is an arrangement fee of £295 […]


Measures to reform the Right to Buy scheme and bring it up-to-date in areas under greatest housing pressure were announced yesterday by Deputy Prime Minister John Prescott. The changes, aimed at meeting local housing market pressures, reducing homelessness and exploitation of the Right to Buy scheme, will mean maximum discounts available to council tenants purchasing […]

India budget: BJP focuses on growth

By Kunal Desai, Head of Indian Equities

With markets kept open on Saturday, finance minister Arun Jaitley delivered a promising budget focused on growth and decentralisation. While many complained about a six-day working week, there was much to be pleased about and the markets rallied in the afternoon to finish in the green.


News and expert analysis straight to your inbox

Sign up