While I whole heartedly agree with the long overdue regulation of the general insurance industry, I am concerned about the effects of regulation on the small broker.
The purpose of the FSA is to protect the consumer. However, I rather fear that the end result of the new regulation will leave the consumer with less choice than before as the expected demise of the smaller broker gathers pace.
Whether it be retirement, mergers or ceasing to trade due to the cost of regulation, the end result is the same, there will be virtually no small brokers left. Many such small brokers provide a much-needed personal service to consumers, who will have no choice other than to seek the impersonal (and often less efficient) service of larger companies.
We have seen this happen already in the life and pensions market where many small independent IFAs have ceased to trade.
I am a small broker and have traded on a self-employed basis for nine years (having been in the industry for 22 years). I am a fellow of the CII and am frequently told by my clients that I offer an excellent service. I transact predominantly commercial insurance with about 150 clients with an annual brokerage income of £90,000.
I have never received so such as a grumble, let alone a complaint. I pay close attention to all my clients and visit them frequently to ensure their cover is kept up to date. All claims are handled swiftly and over the years, several clients have recognised that past attention to detail has meant their insurance has kept them in business after some sizeable fire claims.
I agree with regulation but fear we are using a sledge hammer to crack a nut. I am not aware of any scandals or problems on the scale of the pensions industry and the annual nature of the general insurance contract allows consumers to frequently seek alternative providers if they are unhappy.
One of my main concerns, in addition to the cost of meeting and maintaining regulation standards (not to mention the solvency requirements), is that the requirements relate only to those whose main business is insurance.
Surely a consumer should have the same protection regardless as to who sells the insurance to them?
Regulation should be about a level playing field and to protect consumers. Please therefore address the following points in the consultation period:
Please consider the impact of regulation on small businesses and do not overlook the fact that many such brokers provide a valued service to many satisfied customers;
Do not leave out any organisation that transacts insurance or water down the requirements for such organisations.
If I can't meet the regulations, I would have to stop trading in 2004. It would be an insurance injustice if other organisations were left to continue and they do not have the same experience, professional qualifications and knowledge of the market. This would not protect the consumer. In fact it would have the opposite effect.
Name and address withheld
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