The FSA consultation paper on selling and administration (CP160) has a simple message - change or die, says Chris Blackham
So, is CP160 consumerism gone mad or does it simply reflect the professional standards we should all have been working to for many years?
I am lucky enough to be a broker who has been involved in a lot of other insurance broking businesses. What I have found is many well intentioned insurance men, who almost universally have their clients' best interests at heart.
Unfortunately, their business practices and their investment in training and systems have been inadequate. CP160 is the grim reaper and his message is clear - change or die. It is time to stop bleating and embrace professionalism and for us to speak with one voice to ensure regulation is "appropriate" to our industry and customers.
I am delighted that CP160 proposes a level playing field through status disclosure, but the FSA appears confused as to the meaning of "independent" and struggling with whether brokers need to access the "whole market", whatever this might mean.
The FSA has undoubtedly done some real research into the issues around commission disclosure and its proposed consultation route appears enlightened. However, the definition of "unfair inducements" will create considerable debate when issues such as profit share, commission over-rides and growth bonuses are considered.
Any proposal to educate and inform the insurance-buying public, and in particular the inclusion of policy summaries, is excellent. The belief that showering the public with reams of expensive paper protects them is a fallacy. They won't read it.
The differentiation between advice given to commercial concerns and private customers is sensible, but the inclusion of all businesess with a turnover of under £1m per year as private customers is impractical. Common sense dictates the split should be between those with limited liability and those without. A clear area where individuals need protection is travel and extended warranty business. Bizarrely, this has effectively been sidestepped by both the FSA and the government, which is an outrage. Something tells me that the power and interests of big retailers and travel firms apparently dwarfs that of the consumer.
None of us can contest the FSA's "commitments" which specify that brokers must: "ensure individuals are [and remain] competent for the work they do, that they are appropriately supervised, that their competence is regularly reviewed, and that the level of competence is appropriate to the nature of the business".
The reality is that many firms will not have the resource, ability or cash to do this. These are not commitments, they are commandments.
So yes, CP160 drives professionalism into our industry, but there is a danger that consumerism could take over. Now is the one chance to ensure our views are heard. I urge everyone to invest the time, read CP160 and respond to the questions in Annex C.