' While much has been written about the impending regulation of the general insurance market, little has been said about the implications for firms operating call centres. They are likely to be profoundly affected by the new FSA regime, and how they respond could have a major impact on the sale of insurance.A lot depends on whether firms operating call centres become directly authorised by the FSA or an appointed representative (AR) of an authorised firm (the principal). Some insurers and intermediaries are requiring firms operating their call centres to apply for direct authorisation, arguing that they do not have the capability to take on the regulatory responsibilities associated with ARs.
Burden of complianceHowever, becoming a directly authorised seller of insurance will place steep demands on the call centre, which may not have the necessary resource and expertise to ensure FSA compliance. The firm operating the call centre would be required to comply with all the rules placed on other insurance intermediaries, among other things to appoint approved persons (who could be held personally accountable for any breach of the FSA's rules), with senior management responsible for implementing tight controls over the general insurance activities carried out. Changes would need to be made to IT systems for recording customer information and producing documentation that the call centre (in conjunction with the insurers) would be responsible for issuing to the customer. If, on the other hand, a firm becomes an AR, then it may be that it loses out on business that it currently conducts with other firms who are not prepared to take it on as an AR. The call centre would have to assess whether the savings in compliance costs of becoming an AR of one, or a limited number of principals, are greater than the lost profits from business conducted with firms not prepared to take it on as an AR.Another major consideration for call centres, particularly for those becoming directly authorised by the FSA, is whether or not they sell in their own name or conceal their identity.
Third-party waiverThe FSA is offering third-party processors, acting in the name of an insurer or insurance intermediary, a waiver from the Insurance Conduct of Business requirements. If firms are to take advantage of the waiver, they must agree to the conditions of the waiver whereby the firm outsourcing regulated activities accepts responsibility for those activities and will deal with any complaints relating to them. Call centres would still be responsible for complying with the FSA's High Level Standards and requirements for training and competence and regulatory reporting.Finally, it is important for firms to consider the wider strategic consequences of longer call times on customer behaviour, particularly in terms of how they market themselves. If typically it takes 20 minutes for a customer to buy an insurance policy and they visit five firms for a quote before purchase, then they could be discouraged from shopping around if regulation increases the time needed to obtain quotations. If for example, the business is aiming to be one of the five firms a customer typically calls and the customer decides owing to the increased time each call now takes to reduce their list to four, will it still be on the list?Ultimately, some call centres may decide that the burden of compliance is too onerous for them to compete effectively for new contracts. Insurers and intermediaries themselves should be considering the importance of call centres as a distribution channel and seek ways to assist them in adapting to the new regime.' Colin Rawlings is a financial services partner at Deloitte