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Nicola York finds that regulation has largely failed to boost public confidence because consumers have not yet got the message.

G eneral insurance firms have adapted well after a year of regulation but the public seem largely unaware of the changes.

CBK principal Peter Chadborn thinks regulation has not helped to boost trust in the protection market. He says: “Consumers may be aware of the greater paperwork involved in the sales process and that it is more time-consuming but that is about it.”

But Scottish Equitable product development manager Stephen Crosbie thinks regulation has taken a small step towards improving consumer confidence although there is much further to go.

“As an industry, we are starting to work with consumer groups and the message will get through eventually. It is important to focus on the positives. Many more people successfully claim than do not and we have a tendency as an industry to focus only on those who do not,” he says.

Scottish Widows protection marketing director Nick Kirwan thinks that FSA regulation is likely to have improved consumer trust but he believes that the process was a missed opportunity.

He says it would have made more sense to align general insurance regulation with mortgage regulation because these products are sold together. Investment and protection products are not sold together and he believes that the consumer experience is disjointed.

Kirwan adds: “Customers’ ability to take things in has not changed. I suspect that when a customer has been sitting in an interview talking about finance for a few hours their eyes glaze over and they do not take it all in.”

Looking more generally at the impact of regulation on the protection market, Kirwan thinks one of the disadvantages is the removal of free accident sickness unemployment cover and mortgage payment protection insurance.

In January 2005, mortgage lenders such as Nationwide and Nottingham Building Society ended their free accident sickness and unemployment cover in response to the mounting costs of GI regulation. This raised concerns that customers would be left with unprotected mortgages.

Compliance Solutions managing director Gary Dixon says most IFAs handled GI regulation competently but the pure GI firms have struggled and training was prominent towards the end of last year.

He says: “The FSA will be stricter with firms in 2006. Over the last year, most people have coped fairly well with the general insurance rules as they have come in. But further work is required with the FSA who are still finding their feet on a number of issues.”

One issue highlighted by Dixon is the control of appointed representatives as the FSA did not anticipate that so many appointed representative firms would apply for authorisation and had nothing in place to deal with these firms.

Dixon says that after focusing so much attention on mortgage and GI advisers, the FSA needs to start looking at investment business again.

Investment Quorum managing director Lee Robertson says although regulation has made little difference to his company’s working practices, it will have had an impact on costs for protection-only advisers. “These increases in costs for protection advisers will probably be reflected back to the consumer in the form of higher premiums, although it is still too early to tell if this will happen.”

The impact of regulation on CBK advisers has been minimal, according to Chadborn, although he has noticed an increase in the number of mortgage advisers approaching the firm to form relationships in order to advise their clients for retirement or invest- ment planning.

Chadborn says: “Advisers across the board are making clients more aware of other areas of advice and are referring more clients to us if they do not have the expertise in certain areas. This has had more impact on us than any other aspect of regulation.”

But he is worried by the lack of distinction between advice and non-advice protection sales. “Consumers see it as the same or similar and more emphasis needs to be put on this.”

Scottish Equitable’s Crosbie says there was a lot of concern before GI regulation but he thinks that overall regulation has been a positive change and has added an element of professionalism.

He adds that the costs associated with the advised market lead to questions over whether this puts non-advised sales at an advantage over advised sales. He says: “We want to lobby the FSA to regulate the non-advised market and the regulator will be forced to do something about this if the industry continues to beat the drum.”

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