A time of change in the GI industry

Two years of General Insurance(GI) regulation by the Financial Services Authority (FSA)will be reached on 14 January 2007, and the past two years have proved a time of change.

Explaining the intention of GI regulation prior to its implementation, the FSA said: "We want to ensure that consumers are treated fairly. They should be provided with relevant information on both firms and products and, if they receive advice, the product recommended should be adequate to meet their needs. If they make a claim, it should be handled promptly and efficiently."¹

Coming under the umbrella of the FSA has clearly affected the industry - it is still a thriving sector but investigations by the regulator and the Office of Fair Trading (OFT) has made it a turbulent time. These investigations were partly instigated by negative press regarding sales techniques used in some areas of GI and a super-complaint from the Citizens Advice Bureau(CAB) to the OFT.

But reputable mortgage intermediaries selling Mortgage Payment Protection Insurance (MPPI) and Buildings & Contents insurance (B&C) cover have emerged relatively unscathed from the investigations and complaints.

In November 2005 Clive Briault, FSA Managing Director of Retail Markets confirmed that sales of regular premium PPI sold with prime mortgages were generally compliant. He made it clear that he understands the distinction between MPPI and Payment Protection Insurance (PPI), which can be sold by a range of people, including car sales men, to cover a wide number of policies from credit cards to unsecured loans.

Following its investigation in 2006, the FSA said the areas of key concern were motor dealers and retailers and others for whom the sale of PPI is a minor activity relative to their main business. Mortgage intermediaries obviously do not fall into any of these categories. ²

Turning to the OFT - we are awaiting publication of the report from the Competition Commission on their investigation into selling practices within the industry. In the meantime, intermediaries should ensure they are selling MPPI compliantly and in a way that suits a customer's needs.

Intermediaries should be explaining to their customers the value of suitable GI cover to ensure they are prepared for any unforeseen circumstances.

We have highlighted some of the most relevant points raised by the regulator and put together a simple checklist to reassure any of you who may be worried about advising on the product in light of the recent investigations. A copy of our checklist can be found at http://www.paymentshield.co.uk/pressoffice/press018.aspx

GI is an important sector and Paymentshield will continue to do what it can to offer a range of products and services to help you grow your business. As an intermediary you should continue to sell MPPI in a compliant way to your customers.

Source 1 - www.fsa.gov.uk/pages/library/communication/pr/ 2002/120.shtml,FSA outlines approach to GI regulation, December 2002

Source 2 - www.fsa.gov.uk/pubs/other/ppi_thematic.pdf, The Sale of Payment Protection Insurance - results of follow-up thematic work, December 2006)

- CC317