Complying with the FSA is putting undue pressure on brokers and taking its toll on client service, says Andy Cook
The past six weeks have been something of a phoney war. The FSA regulations for general insurance sales came in on 14 January but levels of renewals and new business have been pretty low. But now the pressure increases.
April is a big month for renewals and March is when a lot of the hard work is done. And this year looks like it will be one of the most exhausting ever.
First, insurers are increasingly working towards lower operating costs - as can be seen from the current round of financial results. In reality, that means fewer people with good experience, and many people with lesser experience or automated systems where just talking with a human being is a bonus.
Second, there is pressure on insurers to produce renewal proposals 21 days in advance of the renewal date. This requires a major change in the way that many insurers conduct their business. And for risks that are out of the ordinary, insurers will be faced with the dilemma of diverting more resources to the high value risks at the expense of the SME renewals.
And third, FSA regulations mean that more work is put into every case. One broker this weekend told me that his postage costs have doubled this year because of all the extra paperwork that needs to be done to satisfy FSA requirements. Another told me that she can only prepare two presentations per day, rather than the half-dozen per day she could under the GISC regime.
So what does this all add up to? Poorer client service is the short answer. Clients end up with a lot of information that they will never bother reading (never have done, never will).
Brokers end up putting in a lot more effort for similar commissions and insurers end up fielding a lot more requests for information which means upward pressure on the operating costs that they are trying to reduce.
The FSA regulations are well intentioned, and protecting customers from rogues can only be supported, but this is looking more and more like using a sledgehammer to crack a walnut. If the FSA really wanted to have a big impact on customer protection, the Treasury should have pointed the regulator in the direction of the travel and warranty sectors, where the majority of complaints can be clearly seen every weekend in the personal finance pages of the national newspapers.