Brokers should remember caveat emptor, says Grant Ellis
Just the other day I received a call from one of my broker customers which got me thinking (and those who know me always worry when that happen).
In September last year the broker passed on to small underwriting agency his client's instructions to remove some cover from a policy it underwrote for him and he subsequently received an endorsement allowing a return premium of some £600. He sent his client a cheque, and accounted to the agency for reimbursement, less his commission, of course.
That was last September. He has still not received his money, despite numerous letters, e-mails and faxes all interspersed with the odd veiled threat here and there. What he has received however (which prompted the call to me) was a letter cancelling the original endorsement and replacing it with one allowing a zero return premium.
The only explanation from the agency was that it had made a mistake, and suggested that the broker recover the monies from his client. Understandably, the said broker was somewhat miffed and is now considering his options.
In truth, any recourse is somewhat tortuous, and it remains to be seen how successful he will be. However the discussion did get me thinking about whether or not FSA regulation would improve the process of resolving such disputes in the future (or not as the case may be). I can't honestly say that I'm any wiser having thought it through.
As it stands, it seems as brokers we're all too ready to take the view "anything for an easy life." In Insurance Times Marketplace there are normally over 60 different wholesale insurance outlets representing every conceivable type of risk, but mainly those which are deemed by most to be difficult to place, or unattractive to traditional markets. Inevitably brokers are drawn to such facilities when faced with trying to get the best cover and terms for their clients.
It is not the periodical's responsibility to vet advertisers, and caveat emptor must remain at the forefront of any inquirer's mind.
Regrettably, most brokers I speak to admit to taking very few precautions when transacting business with wholesalers and trust to good luck rather than good management when it comes to ensuring that cover will actually be placed, with an authorised insurer, and at the terms quoted.
And what will happen that's very different once FSA finally arrives? Well, as far as I can see not a great deal that's positive, at least from a broker's perspective. True, the broker in the example would probably have had to wait for the money to be returned to him before he could, pass it on to his customer.
But, he would have to explain to the customer that the delay is entirely as a result of regulations introduced to protect consumers - I'm sure that'll pacify him.
Of course, while the insured will have a visible and escalating complaints procedure available to him , I am much less certain about the broker's available recourse against underwriting agency/wholesalers. What duty of care do they owe the broker, and what can the broker do if he's not happy? Not a lot is the only conclusion I can reach.Unless anyone out there can tell me different?
Grant Ellis is chief executive of The Broker Network