CETA, the UK's largest general insurance network, has questioned the rationale behind recent reports that Norwich Union (NU) has given brokers a 31 December 2003 deadline to decide whether they will become FSA authorised or exit the general insurance market altogether. Brokers that indicate that they will be seeking direct regulation will also be required to demonstrate that they are taking effective action.
CETA believes that the ultimatum is unreasonable, because the FSA has not yet totally outlined its proposals for the general insurance regulatory framework and as a result advisers cannot know the costs they will incur if they choose to become directly regulated - the FSA's final rules on CP159 (Appointed representatives) and CP174 (Prudential and other requirements for mortgage firms and insurance intermediaries) will not be issued until September while the final rules on CP187 (Insurance selling and administration) are not expected until early in the New Year - after NU's deadline has expired.
Deciding upon its future regulatory status is the most important business decision an intermediary will make this year and they should not be rushed into it by a third party.
There is of course a third option which intermediaries can choose not mentioned by NU - becoming an appointed representative of one of the principal networks which will undoubtedly emerge over the next 12 months.
These networks will source their policies from a panel of insurers - not just NU - so the chances are that brokers will be able to access more competitive products that pay better commission.
Our advice to intermediaries is to take your time and do your research carefully.
The general insurance market is large and very competitive. Advisers who wish to continue selling general insurance policies after January 2005 will find that there will be other companies out there who will be far more understanding of their position and who will be more than happy to do business with them whichever regulatory route they choose to follow.
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