Brokers can be caught out by proposals that obscure who is the main driver of a vehicle. And what does the FSA say about recommending insurers? Also should examinations be timed? Waltham Pitglow explains

We covered the subject of 'fronting' a few weeks ago. This is the practice of proposing for motor insurance in one name as a main driver, where another person is the main driver. We asked for comments and ideas on reducing the risk of a broker being caught out on this.

John Portwood of B Portwood & Co in Consett, kindly took time out to share his research with us. His comments are reproduced with his permission and I hope this is helpful.

In our experience insurance companies seem to have reduced the problem by some simple on-screen underwriting. These include:

  • Always rating the policy on the age of the youngest driver. For example, Link

  • Always rating the policy on the age of the youngest driver, if there is more than one vehicle in the household, perhaps with a note to refer if the young driver already has a car. For example, Broker Direct/ Norwich Union

  • Programming, so that the premium for the young driver only to drive is cheaper than named drivers to include the young driver. For example, Highway/ Fortis.

    Obviously these methods only work if the broker adheres to them. Some unscrupulous staff, under pressure to achieve targets and aware of these criteria, may 'forget' to ask the questions or enter wrong data hoping that the insured does not spot the error (or is told - don't worry it does not matter). They rely on the premise that, once the proposal form is signed it is the proposer's problem.

    Gone are the days when everyone knew that the Guardian was the only company which did not ask how many cars there were in the family.

    Current GISC codes for the sale of motor insurance states that the customer must be made aware of the consequences of non-disclosure, presumably including avoidance of claims (or the voiding of policies) with consequent financial penury and possibly being prosecuted under the Road Traffic Act (thankfully very rare).

    If I were suspicious of the customer's motives, even after the above had been pointed out - and this would by any old car with a young driver - I would obtain an additional declaration confirming who was the main user and that I would be advised should the main user be changed.

    I would point out that if the vehicle were purchased by the proposer for the use of the young driver that the policy must be set up in the proposer's name with the young driver as the main user. This assumes the proposer is the legal owner of the vehicle and not just the registered keeper (principle of insurable interest).
    Some interesting thoughts on risk management there.

    To time or not to time?

    Finally, a question this week that is commonly raised in the broking industry. "If I set a knowledge assessment, should it be timed?" The key to objective assessment for a group of people doing the same job and the same assessment is that they all have an equal chance.

    The question posed here is simply whether everyone should be given the same time to complete the assessment. Our view is that it is just as objective to ensure that there is sufficient time for everyone to finish the assessment. How many more examination qualified practitioners would there be if everyone was allowed to finish an exam?

    Our experience is that common sense should prevail and that there should be a time limit, but that it should be set to allow plenty of time for all staff to answer all questions with some time to spare.

    Beware the examiner or management consultant who considers the completion of a knowledge assessment to be a race or benchmark against his own ability. Protecting the public is not about giving advice as fast as possible but as carefully as possible, so do not be bullied into something that makes your staff unnecessarily uncomfortable.

    We would be interested to hear of any stories you have on the subject of advice you have received about assessment of staff which you think has created unfairness.

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