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Commentary – Simon Hudson

Now that the dust has settled on the regulation of mortgages and general ins-urance, an interesting by-product has arisen where possibly, for the first time, big distribution groups in the investment arena find themselves as equally big distributors in the mortgage and general insurance marketplace.

This revelation was, of course, concealed by the ability of advisers to hold various agencies outside their agreements with their principals.

This applies equally to small IFA firms with a handful of advisers, nationals and networks. Along with this realisation comes res-ponsibility. Perhaps for the first time, IFA distribution has had to take into account the quality of products and advice being given to the consumer regarding mortgages and general insurance when prior to this it may not have been seen as necessary.

Whether this was seen as necessary is a point for debate and I would certainly suggest that it has always been good practice to take such responsibility.

Nevertheless, this new dawn should make principals of big and small IFA firms and indeed previously non-regulated, that is, non-investment firms, look carefully at the quality of products available.

Buildings and contents insurance and accident sickness and unemployment insurance are sold and advised on in vast numbers, in the main associated with the sale of mortgage products. There have been, and to a great extent still are, a whole range of companies who sit in between the adv-iser and the insurer promoting these products. Prior to regulation, these commodity products ten-ded to be sold on the basis that they were okay, cheap and paid well.

Interestingly, another consequence of regulation is that rather than selling these products based on a cost comparative quotation, we now see various research companies starting to do qualitative analysis and star ratings of these products.

You will probably not be surprised to know that, quite often, the cheap and cheerful products that historically have been sold en masse do not stack up in a qualitative comparison. Strangely, these better quality products are only marginally more expensive from a customer point of view but are substantially more fit for purpose.

With regulation comes transparency, more information for the consumer to base his or her decision upon or his or her complaint. PII insurers will closely monitor the impact that consumer knowledge will have on complaints which will inevitably rise, especially if advisers ignore the move towards the quality product. The last thing we want is more financial pressure due to PII premiums rising.

The time has come for advisers from all distribution types to review their products and approach the sale of general insurance in particular from a qualitative and consumer benefit angle, not just price.

Inevitably, this will change the dynamics and no doubt some of the old suppliers will find this new comparative market impossible to operate within. All this is good news for the consumer and good news for the adviser.

Simon Hudson is chief executive officer of Tenet Group

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