Tony Edwards explains how a broker can meet the FSA's continuing requirements
It's nearly three months since the general insurance industry joined the regulated world of the FSA and firms should now be in line with the regulator's requirements.
On achieving compliance, firms roughly split into two categories: those who have understood and made the changes, implementing them into their working routine, and those who have made an effort and hope they've carried out the minimum that is required.
There is a further sub-category to both groups: those who think they have got it right, but haven't.
While brokers have attempted to put regulation into practice, they probably question their own degree of success, which is understandable. Trying to read, understand and integrate the insurance conduct of business (ICOB) rules proficiently can be a full time role in itself.
Brokers are left with a hard decision to make. Do they spend the money on a full-time person to cover their regulatory issues? Do they hire a firm in to give advice and offer support services or do they 'go it alone'. In most cases, hiring gives the best value for money while helping to achieve and maintain standards.
It must be remembered, however, that even if you buy in a compliance service, you must still take responsibility for the regulatory requirements.
One useful tool to help you achieve this is the Biba Compliance Manual. This is an excellent framework for anyone to build and use a firm-specific compliance, training and competency scheme. Like all good manuals, it is only useful when it's read and utilised - not when left on the shelf.
There are several helpful templates which do require attention if your firm wishes to be ready for a visit from the FSA.
Make no mistake though, getting your firm up to at least a minimum standard is more than a few hours work, especially if you wish to pay more than 'lip service' to this exercise.
Issues around the understanding and running of the client monies account, the requirements to act as 'agent for the insurer', relationships with sub-brokers and other parties and documentation requirements, all add to the regulatory burden.
Nearly all brokers will have created a compliant initial disclosure document, but have they remembered to cover the other required declarations to be made to their clients which fall outside of this document?
At Hugh James we have spent considerable time building bespoke terms of business documents combining both the regulatory requirements over and above the requirements of the initial disclosure document, and the business/legal requirements.
There is the ongoing responsibility to maintain these standards, prepare and adjust for new requirements and change existing ones.
Every broker should be aware of the changes to the reporting requirements which will take effect from the 1 July 2005. This will require electronic returns to be sent to the FSA that are specific to your firm.
Those firms who also have involvement with packaged products will also need to be preparing to meet the depolarisation requirements before the deadline of 1 June 2005. Less than two months away.
Computer based client management systems used effectively and combined with a positive commitment for compliance training and support will be the foundations for this success.
There are many client management systems available on the market to suit the demands of most if not all businesses. Details on these systems are regularly advertised in the insurance press and research into the relative benefits, drawbacks and costs of each will be well rewarded.
Some firms may well invest in dedicated compliance staff, others and in our view, the vast majority will seek the services of outside compliance support firms to take over the vital function of compliance and training and competency.
At Hugh James we provide a complete range of compliance and training services to suite all types of insurance professionals.
Whichever firm you choose it is vital that brokers choose well to avoid the potential problems of misinterpreting the FSA's rules and guidelines.
In any event, we advocate the adoption of a industry-wide, uniform compliance manual as the foundation to help with the way that firms follow the FSA's requirements.
And in our view there is no better than the Biba Compliance Manual on which we build all the training and competency schemes which we have built for brokers since its launch.
In summary, it is our view that those firms that survive and flourish will be those that have their house in order and have invested in systems and services that will make their businesses both compliant and efficient. In fact it could be argued that compliant and efficient go hand in hand. IT
' Tony Edwards is financial services director at Hugh James Solicitors