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Lawyers get GI market freedom

Solicitors can introduce general insurance products to non-independent sectors of the adv-isory market under new guidelines from the Law Society.

Under the new rules governing the regulation of GI, solicitors can introduce clients who want general ins-urance products to sole-tie, multi-tie or whole-of-market distributors. This is markedly different from investment products, where a solicitor must introduce to a whole-of-market adviser.

Until now, solicitors were prevented from having any arrangements under which they could be constrained to recommend certain referrals.

But the Law Society says the practice is acceptable provided the insurance policy is suitable for the client’s needs and the solicitor has informed the client of the constraint.

This means solicitors can recommend to brokers selling only one firm’s insurance policies and can accept a conditional fee arrangement.

Scottish Widows market director (protection) Nick Kirwan says this moves away from the basic principle of the solicitor who has to act independently on behalf of his client. The distinction also seems to suggest that protection is less important than investment.

FSA spokesman Robin Gordon-Walker admits that the regulator’s approach to gen-eral insurance is of a lighter touch and less prescriptive. He says: “There is not the same degree of loss in strict financial terms as investment products. The detriment, broadly speaking, tends to be less.”

Kirwan says: “Has this really been thought through? The anomaly is a bit strange between investment and general insurance. I am trying to square the circle. The whole point about a lawyer is that you are by definition independent.”

Plan Invest Group joint managing director Michael Owen says: “The question is, is the FSA correct in saying that there is less risk?”A Law Society spokesman says: “We have issued guidance and we believe solicitors are well equipped to advise their clients appropriately.”

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