Test your knowledge of handling client money, says Julian Hall of AXA Insurance

This week's questions come from the AXA Campus course FSA Regulation - Client Money. The course is of interest to anyone requiring an overview of the FSA rules on handling client money.

The objective of the course is to provide a broad overview and understanding of FSA rules and compliance requirements.

Insurance intermediaries must receive specific permission from the FSA in order to hold client money. This permission is shown on the FSA register, which can be checked by visiting www.fsa.gov.uk/register

Client money includes:

  • Premiums paid by the customer to the intermediary for onward transmission to the insurer
  • Claims payments or premium refunds paid to the intermediary for onward transmission to the customer.
  • In these circumstances, there is a potential risk for the customer if the intermediary were to go out of business or funds were misappropriated.

    In the first case, their insurance policy may not be valid and the customer may have to pay again to secure cover. In the second case, the customer could be out of pocket if insufficient funds were available when the business is wound up.

    In relation to fees, clients may find themselves having to make a duplicate payment if the funds have not reached the right party.

    The FSA rules are therefore designed to protect customers in these circumstances. Full details are contained in Chapter 5 of the Client Assets Sourcebook within the FSA handbook. Intermediaries have two options under the rules:

  • To hold the money as an agent of the insurer, in which case the insurer accepts responsibility in the event of failure of the intermediary, or
  • To hold the money in trust (or in Scotland as agent of the customer).
  • AXA Campus is an ideal learning tool as it provides over 380 courses and incorporates tailored versions of CII ed LEARN and ed ASSESS (AXA ed). This relationship provides a natural fit between the soft and technical learning material of AXA Campus and the qualification and compliance aspects of AXA ed.

    The questions for this course are supplied to AXA Insurance by Searchlight Solutions.

    If you are interested in using AXA Campus email: julian.hall@axa-insurance.co.uk .