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Best conduct

The theoretical perfection sought by the RDR might just start to become practical perfection in 2013. I hope so, for as much as I loathe the regulator’s scornful dismissal of sales-advisory businesses of sound repute and long standing, the end result will be a small and identifiable tribe of professionals that might well be able to grow dominant.

Alongside them we can expect a raft of tied and semi-tied sales forces and alongside that the online world of guidance and simple transactions. It might just end up being an orderly market after all.

There is one aspect of all this change that the protection market should be very wary of. It may well increase the already fast-growing number of poorly run telephone selling operations, both advised and non-advised, that have imported the tactics of the unsecured loan and claims management markets into ours. At first glance, they can look a bit like my business but they have a sell-at-all-costs philosophy we despise – protection is too important for that. If left unchallenged, this crowd will do the whole market great damage.

Rather than just sound warnings I would suggest a basic code of conduct aimed at promoting the uptake of protection by clearing up areas of known customer confusion and supply-side failing across all types of distribution.

Protection seller’s code of conduct

All those who arrange protection provide vital cover for consumers in crisis. This makes it imperative our overriding aim must be to serve well those who buy protection, no matter how they do it.

The following shortlist tackles the most obvious current failings found in protection intermediation and thus represents a minimum set of corrective behaviours if that is to be done.

Its provisions can easily be met on websites, face to face or in telephone conversations, whether they are deemed by the FSA to be advised or not.

  • Those selling critical illness cover must explain its limitations in line with the FSA’s requirements.
  • Those who choose to highlight terminal illness benefit as a product feature must explicitly state its limitations and ensure it is not confused with CI cover.
  • Those choosing to discuss total and permanent disability cover and income protection must explain the definition of disability on which the policy will pay out, such as, own-occupation or activities of daily life.
  • Those selling PPI/MMPI/ASU must make the standard exclusions clear to customers and must mention longer-term IP as a viable alternative at some point in the sales process whether they offer it or not.

– Sellers must clearly state at outset whether they provide regulated advice or not.

– All sellers must demonstrate they have properly provided for the repayment of indemnity commissions on lapsing policies.

I wonder what you think of it. I bet you will want to add many things but my aim is to cover non-advised and online sales too, and their duty of care is much simpler than advisers’. And so, if you go much further then you are making a rulebook for advisers only and we have enough of those.

I hope to get insurers to agree that it is sensible to set minimum standards and that they ask all their agents to sign up to and honour in practice a final version. As I see it, that is basic self-regulation and that is the very best way of avoiding the destruction the regulator has already inflicted elsewhere. Or to put it simply, so long as we stop dodgy distributors from jumping on it, protection has a great future.

Tom Baigrie is chief executive of Lifesearch

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