FSA warns ‘hotspot’ sectors to act now

The Financial Services Authority has named the ‘hotspot’ sectors of firms selling insurance who have yet to apply for authorisation and warned them to do it now.

If not they could risk losing business before regulation comes into force on January 14.

Whilst over 14,000 insurance firms have registered with the FSA to apply for authorisation, with less than six weeks before the start of the regime there are more than 4,500 that have still not applied.

Top three hotspot sector groups are motor dealers, removals firms and property managers.

Sarah Wilson, director of the FSA high street firms division, says: “We are extremely concerned to see that despite our ongoing correspondence and work with these sectors, there are still firms who have not applied or become appointed representatives. We urge these firms to take action now and contact us.

“Whilst some of the 4,500 firms, who have only registered, may have decided either to join a network or drop the insurance side to their business, we know some of these firms still plan to do business and are
not ready.

“We also believe there are firms who haven’t even registered.

“These firms must understand the consequences of doing nothing.”

After January 14 it will be illegal for a firm to sell regulated insurance to a consumer, in any guise, if it has not applied for authorisation or become an appointed representative.

Wilson says: “We want the industry to be ready by January 14 and as with mortgages, we’ll be doing everything we can to look at the applications and AR notifications we receive before January 14.

“We are also warning consumers of the dangers of dealing with businesses who are unauthorised after January. The first thing we will be advising the consumer to do is ask if a firm is authorised before doing business.

“If you buy an insurance policy from an unregulated firm after January 14 it won’t be covered by our rules. That means, for example, that if something goes wrong you won’t have access to the Financial Ombudsman Service.”

The FSA is contacting all secondary firms who have registered but not completed an application form to remind them of the short timescale.

Additionally the FSA has been working with the industry and trade associations on general insurance regulation for the last three years, undertaken two advertising campaigns to alert firms and provided intense industry training.