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If you want to be Kosher disclose your commission

This week in protection the Wilson v Hurstanger court of appeal case has been stirring the waters.

The case, heard in April, saw a client successfully sue his mortgage lender because his broker, who organised a £7000 loan and charged him a fee of £1000, had not fully disclosed the commission he was paid by the lender.

ABI protection committee chairman Nick Kirwan feels the case will have far-reaching implications and predicts that, for starters, providers will be forced to disclose all commission paid to advisers to cover their backs.

Since October 2005 brokers advising on residential mortgages have been obligated by regulation to fully disclose commission although the FSA says brokers advising on non-residential mortgages, such as buy-to-let, protection products and general insurance do not have to.

But all fee-based advisers are obligated to disclose commission under agency law because, in the eyes of the law, the fee means they are acting as an agent of the client and if they receive commission, which the client has not given informed consent to, a conflict of interest arises.

Basically the law considers any undisclosed commission a bribe.

Kirwan believes most advisers are unaware of their legal responsibilities and feel that, because they are fulfilling their regulatory requirements, they are as Kosher as challah with tuna dip on a Friday night.

But he says they may have a rude shock because, while the client went after the lender in this case, the adviser is just as vulnerable to litigation or to being hunted down by the provider for compensation.

Some providers, such as Standard Life, already send out a commission disclosure document to the client with the IDD so should avoid the firing line but others may have to brace for bad weather.

On a more positive note this week Holloway Friendly Society has announced that the rates on its classic plus income protection plan are now non-reviewable so premiums will not budge from the original table printed for each policyholder at the outset.

The Friendly has also extended its own-occupation definition of incapacity from 12 months to 24 months.

We also hear this week that advisers are extremely technologically savvy according to Royal Liver which found, after surveying nearly 600 advisers, nine out of ten are now writing protection policies online.

CBK principal Peter Chadborn says “we don’t want to be luddites” and obviously the vast majority of advisers in the UK feel the same way. Keep up the good work.

But Royal Liver IFA market manager Andy Milburn questions providers who still use paper.

He says: “At some point in the future paper will become unviable and providers will have to make the decision to remove it or lose money in keeping it going.”

And last but definitely not least specialist broker the Insurance Helpline has signed a deal with pharmaceutical giant Abbott Diabetes Care which produces tiny blood glucose monitoring systems.

Under the deal the Helpline will supply these “gizmos” free to any diabetic who requests a quote because, if a diabetic has their blood glucose level under control, the loading on their life premiums drops by around 200 per cent making a £20 a month premium increase to only £40 rather than quadruple to £80.

Another hero! To infinity and beyond!!


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