With FSA regulation looming, we need to learn how to make our views felt. Robin Wood outlines potential problems and appropriate answers

I have read with interest CII president Dr Sandy Scott's unexpected pronouncements on the need for more examinations (particularly relating to liability insurance) and I would like to draw your attention to two things.

In the first place I would ask that you read last week's letters page in Insurance Times (16 January). I am not going to make any comments about the reader's opinions, but I do want you to consider the professional standard of these letters. They are not whinging or discourteous, but well thought out and measured responses. I guarantee you that the regulators will not only read these, but will also consider the feedback with the respect that will be afforded to any professional opinion that is aired within the consultation process.

So, learning point one this week is just a reinforcement of what we have said in the last month. If the FSA consultation papers affect you - or indeed there is anything anyone says that might affect your future or anyone purports to represent your views and doesn't - write and let the FSA know.

Learning point two is rather more subtle but goes to the root of modern regulation ... evidence. In seeking to achieve both the European Mediation Directives and the FSA's goal of job specific competence (being a major route to customer protection) those working at high level and street level all need to gather evidence of when competence does or does not exist to a reasonable standard.

We need to revisit the subject of key performance indicators (KPIs).

Nothing can be absolute, but on the positive side, we are beginning to understand the KPIs that demonstrate competence.

For example:

  • Assessment of job-specific knowledge and understanding

  • Observation of practitioners on the job or in a controlled role play environment

  • File checking

  • Monitoring of meeting and renewal notes

  • Monitoring of point of sale record

  • Checking of claims files and settlements.

    If all of these (and there are more) are evidenced as fact - written or recorded evidence - and benchmarks of reasonable standards are set, either by the regulator, the industry or an authorised firm, we can establish whether a particular practitioner is falling short of those standards and go on to take remedial action.

    If there is substantial evidence that many practitioners are falling short of a particular benchmark, the industry (led by the major trade associations) and the regulator may well have to think of drastic and broader solutions to the problem that may involve compulsory learning and assessment. In this case an approach to the leading examination and assessment bodies to propose an industry-wide solution might be appropriate.

    Show the evidence

    What is missing, it seems, is any evidence that lack of practitioner knowledge is at the root of the current problems in the liability market. If it exists let us see it.

    However, the general insurance industry benefits from another range of KPIs, after the event (ATE) evidence, which also allow us to consider trends in lack of competence.

    These are typically:

  • Complaints (to the authorised firm, the regulator or a trade association)

  • Ombudsman cases

  • Professional indemnity (PI) claims.

    Many of these are triggered when the policyholder is surprised when a claim arises.

    Clearly the regulator will be monitoring complaint records from all those above, and if future controls set by the regulator are to be realistic it is vital that each broking firm operates an efficient and detailed complaint-recording system.

    The ombudsman will keep detailed record of cases presented to him and his staff but these have the limitation of not extending beyond private policies and SMEs.

    That really leaves us with one of areas of considerable concern, namely PI claims.

    As a point of interest, RWA Experts is a group of expert witnesses that advises the courts and legal profession on insurance market practice. Having seen perhaps a thousand or more cases over the last decade it is interesting to note that there are no real trends of incompetence as it relates to specific types of insurance. Nor indeed are there more than a smattering of firms who seem to be repeat offenders.

    Indeed, in RWA Experts' travels around the country it has become clear than many brokers never have a PI claim in a career of perhaps 30 years or more and for others who do, it is generally a very rare occurrence.

    And yet the claims can run into many millions, even for a relatively small broking firm, and there are cases where the levels of indemnity are just not enough when the case is found against the broker.

    Assistance is best

    To understand the main areas of risk to the public, the FSA will have to ask questions and seek evidence. To my mind the broking industry as a whole will serve itself best by assisting in this process. Whether it is an FSA questionnaire or a fact-finding visit it will pay to be open with the regulator and to assist by telling them as much about your firm and personal experience if asked.

    Much of what we see in litigation against brokers revolves around behavioural deficiencies such as record-keeping, giving and gathering information and keeping knowledge up to date, not an underlying incompetence. If we are right then the regulator can focus on those issues.

    If, as an industry, we believe that the public is not at risk generally by way of incompetence that draws from knowledge of a particular type of cover then we must provide evidence and diagnostic assessment and records of the results must be present.

    Ultimately, there may well be a qualification for brokers before they can give advice, but I am confident that the FSA do not want this for the sake of it.

    There are few common problems of competence in the broking profession, but we need to be honest and open and help the regulator understand what those are. If we do not, they can only react to hearsay and speculation.

    You really only have six weeks to read and respond to consultation papers CP159 and CP160. If you have not done so already, get onto it now and give your feedback.

    Robin Wood is the proprietor of RW Associates

    Using this CPD page

    For the vast majority of practitioners and indeed support and supervisory staff in our industry, CPD is about regular learning and study that is planned, recorded, timed and evaluated.

    If you are a member of a professional body with a CPD requirement then there will be certain rules regarding the quality and nature of study material, and the way in which it is recorded.

    For staff of GISC members this means recording on your individual training file what the learning was, who provided it and when.

    It might be structured, such as a course, a learning programme or exam study. But it can be unstructured. This form of study encompasses reading the trade press, technical material or taking part in activities to support your professional body.

    Some CPD requirements are points related (a little antiquated) and others require a time value to be allocated.

    For example, it might take one hour to read Insurance Times each week. Most of that could be put as a time value but, in reality, perhaps only an half hour was devoted to learning something. The rule is to be honest with yourself and record the time that is relevant.

    Always take time to make a note of what you felt you gained from the activity. This is useful information for anyone else considering the same activity.

    In response to the popularity of our CPD programme each week's CPD page can now be downloaded from our website. We will be preparing a binder for you to keep these in alongside the results of the exercises.

    To download a PDF of this article as it appears in the magazine click here

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