Debate on client monies is surely irrelevant

Debate on client monies is surely irrelevant

I do not wish to ruffle any feathers within the industry but I am amazed that the debate continues over the issue of client account monies.
Naturally, messrs, Paddick, Bolam and Slack are representing their members and Mr. Woodburn is hoping to reach what will amount to a compromise to get the show on the road.
What everyone seems to be forgetting is that the purpose of the exercise is protection for the public and a suitable self-regulatory environment.
It seems from comments made in the press that alteration to the handling of client monies could cause the failure of a large number of brokerages and intermediaries.
Is someone suggesting that they are financing their operation with client monies, that the premiums paid are being diverted to pay other client premiums or worse still the electric bill? All the letters and discussion topics we have seen in the press over the past year or so are simply hot air if these
tactics are being used by any future member of the General Insurance Standards Council (GISC) or members of the other trade bodies.
Sense must prevail. It is essential that whichever body/ies take the initiative in the coming months, a method has to be agreed for all parties.
I suggest that monies paid by clients for premiums due should be held in the designated client account until due to the insurers. Only when paid to the insurer should the commission be taken and transferred to the office account. Premiums for client A should not be paid with funds received from client B, just because A is a “slow payer”.
I am aware that many take commission when premiums are posted and this alteration will lead to cash flow shortages but similarly, other brokerages could end up with a cash surplus by converting to the alternative method. A surplus, I would remind you, funded by our clients funds.
I presume these firms which will be affected by any changes have heard of overdrafts and bank lending. What, might I ask, would happen in the event of an insolvency?
Currently, if the client account is underfunded, ie cannot pay all premiums to insurers received from clients, then the receiver will just not be able to meet all the premiums received by the brokerage from the account.
Somewhere along the line this practice must meet the boundaries of fraud.
A fully funded client account, as suggested, would enable a receiver to pay client premiums to all insurers. The commission due could then be taken and form part of the assets for distribution to creditors.
While I am unaware of the potential problems I cannot understand why trust account status similar to solicitors cannot be employed, the public would be totally protected. Are we just scared to implement such a radical change?
Another alternative is of course personal guarantees for the client funds, that is if there are any personal funds in the background. Did anyone ever check this?
I would suggest that some of those businesses likely to walk the narrow path are headed by individuals who may either not have assets or could make them cleverly disappear leaving a shortfall and lack of protection.
A bond has been suggested, and the cost has been criticised. Will these people please get into the real world. This is a life line and quite frankly a compromise.
How can we as an industry convince outsiders that the practices we employ are in the best interests of the public, when we cannot come together and stand firm on what must be the most important issue of all?
Before you all put pen to paper, would you be happy to let your client know that his cash has paid a premium of another client or your electricity bill? Just remember, we only are entitled to a percentage of the clients' premium.
Charles Larkin
R T Moore Insurance Brokers

A question of authorship

Last week, John Gray of GTI wrote to Insurance Times to complain that use of Polaris software had led to many more questions being asked before his system would provide motor insurance quotations.
I have no idea who suggested to Gray that Polaris was responsible for long question sets but, the allegation is, quite simply, rubbish. Polaris software allows insurers to ask as many or as few questions as they wish before providing terms and conditions.
There are insurance schemes written using our software which, like the example Gray quoted, provide quotations on the basis of half a dozen or fewer pieces of information.
In fact, insurers working with software houses can provide quotes on the basis of two or three questions if they wish.
The key point is that the decision of how extensive a question set to employ belongs to the product author within the insurance company and the broking system provider; Polaris provides the software tools, its does not write insurance products.
Perhaps Gray should dig a little more deeply before publicly airing his mis-conceptions.
Martin McLaclan,
managing director,
Polaris UK

Fact or fiction?

I am writing regarding an article in Product News, Insurance Times page 14, September 21.
The article headed “Policy for those who work from home alone”, I regret is inaccurate in one fundamental way.
In the article Rob Page of SVB Underwriting Services states: “What we have done, for the first time in the UK, is bring together all the relevant insurance cover together in one place”.
This is incorrect as we have successfully been running our own scheme Home Plus Work, underwritten (excluding professional indemnity) for nearly five years by Norwich Union.
Home Plus Work not only utilises the basic Norwich Union household products but also includes full business cover at different levels of business contents.
Furthermore, according to our research carried out more than four years ago, and subsequently confirmed by BT, significantly more persons than quoted actually work from home.
But maybe that is where the difference lies between our two schemes – SVB would
indicate that they are looking to deal mainly with the professionals in the market, whereas, Home Plus Work, is not only ideal for professionals but also for trades people, and arts and crafts, as well as many other occupations.
I am sure Page will find this area a very good market, however, I would recommend that he checks his facts first.
David England,
managing director,
Topcrest Insurance Brokers,

Give me a brake!

Tony Cornell wants brokers to point out to insurers the silly low quotes they may give, Insurance Times, Viewpoint page 18, September 7.
What about the increases in renewal premiums? Anything from 10% to more than 400% to established clients with good claims records.
Typical of today from a major insurer – a mature client, with an excellent record, standard vehicle, full no claims discount – the premium was £181 last year. The renewal was for £724 and was issued without any comment.
MH Green,
Retired motor underwriter,

No marked difference

Rather than breaking all the rules, Marks & Spencer's new policy only breaks one or two.
We have been selling a contents policy with no sum insured or excess for more than 20 years as have, I suspect, many other building societies.
We also include in this package free annual family travel insurance – now beat that, M&S.
David Watt,
insurance manager,
Furness Building Society,

Where's the obligation?

Kathryn Faulkner's comments about insurers breaching long-term undertakings, (letters Insurance Times, September 28), brought to mind a wonderful euphemism that one insurer used last week as a preface to applying a swingeing rate increase: “We will be releasing the insured from their obligations under the LTU clause at this renewal...”
It is evident that some insurance companies feel that they have neither contractual nor moral obligations under these arrangements.
Kevin Windeler,
Shaw Insurances,
Stockport, Cheshire