Dual pricing decision was forgone conclusion
Dual pricing decision was forgone conclusion
Recently, a small group of brokers asked the Office of Fair Trading to investigate the dual pricing of motor insurance, via broker and direct dealing divisions, with a view to such practices being condemned under the Competition Act 1998 – citing Norwich Union as the primary example.
I have every sympathy with the brokers concerned and understand their frustrations. Unfortunately, as I predicted, the OFT did not consider that there had been any breach of competition law, or that these activities were detrimental to the public interest.
As much as many would like, competition law does not exist to protect the commercial interests of retailers, which in many industries are faced with moves by product manufacturers to sell goods/services directly to consumers at lower prices. Indeed, in just about every developed economy in the world, the competition authorities actually support and encourage this growing trend – which is set to expand rapidly as the internet becomes a powerful driver of change.
Middlemen who add unnecessary cost to point of sale prices, instead of adding meaningful customer value to the buying or after sales support process, are an endangered species. No association can artificially protect against the entirely legitimate forces of consumerism in a free market economy.
What really aggravates brokers are the odd cases, where the apparent premium differential is substantial. This is also very embarrassing for the insurers concerned, who have no desire to “cannibalise” their own business and I know, after discussions, are taking active steps to reduce the incidence level.
Given the scale of the operations and different business strategies of the personalities involved, there are going to be pricing differentials. There will no longer be such a thing as a “set published rate” for a particular risk from any major insurer. Indeed, some brokers themselves operate large schemes and have effectively “been given the pen” – if their account overall is profitable, there is nothing to stop them quoting half the price shown on standard broker quote screens for any risk they are willing to accept.
We at the Institute of Insurance Brokers cannot stop market forces driven by shareholder expectations. However, we can work for the collective benefit of members generally and no association in the UK has done more in this regard than the IIB.
P.S. In a letter written to Insurance Times, a Mr. Jackson accused me of seeking self-preservation. He is absolutely correct and, this is directly linked to the preservation of brokers upon whom I depend for a living and to whom I must provide value. He also accused me of “trying to wreck the General Insurance Standards' Council”.
This is simply not true. I have recently built a yacht of my own, which floats and works properly. However, I have had absolutely nothing to do whatsoever with the building of what appears to be a rather leaky tub, call sign: Golf.India.Sierra.Charlie.
Welcome trend of testing competent practice
Two pieces of news appeared in Insurance Times last week that, dare I say, indicate the beginning of a trend that is here to stay for quite some time and which in themselves indicate the welcome quantum shift of onus within the industry.
I refer of course to the two items that relate to training and competence.
In the first place, David Crump has been appointed British Insurance Brokers' Association training and development manager.
The second is the announcement that the Institute of Financial Planning has designed a generic multiple-choice test to assess general insurance knowledge.
The minimum standards of competence required by the General Insurance Standards' Council are far more aligned with competence to do one's job. A multiple-choice test does no more than confirm generic and basic knowledge. But, what a welcome addition to the process of inculcating training and competence within the industry.
GISC has quite rightly indicated that it wants to create a common benchmark of competence for each sector of the general insurance industry. That means there must be a level of objectivity. In other words, the benchmark must be fairly equal for practitioners doing the same job.
“Aha!” cry those interested in making money from the examination process. “What could be better than a common exam or multiple-choice test that has to be completed by everyone, within the same time limit?”
Well, if you want to follow that philosophy, then I suggest you have a good personal indemnity and legal expenses policy.
The correct answer is that to be objective, it is not a question of everyone having the same time limit but of everyone being given as much time as is needed to complete the test – given that competent advice is not a race.
The second point is whether such a test measures the ability to write at a certain speed, under pressurised conditions, as much as a practitioner's knowledge.
Assessing competence professionally is a balance of a range of ideas, but ultimately, I believe that the acid test is whether an individual can do the job in hand, and that can only be assessed by observation and results.
This leads to the announcement that was relegated to the bottom of the article referring to validation and verification.
If any assessments that GISC members carry out lack these two vital components, then money and time may be wasted on processes that are not sufficiently robust.
In a nutshell, do not undertake assessments of competence unless you have confirmation from a third party that those assessments measure competence correctly, and further that you are able to prove that the assessments took place and that the results of the test are valid.
(Training, competence and compliance specialist)
Helphire is having us on
The front-page story “Court case to end confusion”, Insurance Times August 31, was indeed a fascinating read.
It would seem that Helphire is seriously expecting us to believe that by means of a magical letter, all of its problems are to be resolved.
This is a company that told us that it would win Dimond v Lovell. Now its legal director Peter Holding expects the motor insurance industry to gift Helphire more than £90m in return for bundles of car hire invoices which, by any measure, could not be described as the top end of the range.
Personally, I don't think this is going to happen – and presumably neither do the market investors that have driven Helphire shares to a record low of 50p, having wiped out some 87% of the company's perceived value earlier this year.
Clearly, the sensible investors have already sold, and one has to assume that the 40 or so staff being made redundant by Helphire are most unlikely to invest their compensation money in Helphire shares.
Paul J Asplin