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Lifesearch: New laws will push up protection costs for restricted clients

New insurance legislation is likely to see providers charging higher premiums for policies from restricted advisers compared to IFAs or whole-of-market protection advisers, according to Lifesearch.

In April, the Consumer Insurance (Disclosure and Representations) Act will make changes to the information consumers must give when applying for pro­tection and GI products, with consumers only having to show “reasonable care” when answering questions, rather than volunteering all relevant information.

The act will also change the law of agency, removing the assumption the adviser always acts as the consumer’s agent. From April, IFAs will still be classed as an agent of the client, while restricted advisers are likely to be classed as agents of the insurer.

If the adviser is shown to be acting for the insurer in a claims dispute and is responsible for a “misrepresentation”, the insurer will have to abide by the contract. If the adviser is acting as an agent of the consumer, the insurer will not be obliged to pay the claim, with responsibility falling on the adviser.

The Law Commission predicts insurers will pay out £4.4m in additional claims annually, with relevant premiums rising by around 0.1 per cent.

Lifesearch chief executive Tom Baigrie says: “The question is not whether the act will make the channel insurers control more expensive, but how much more expensive. If one channel is more expensive than the other, then it should be priced differently. For me it is logical to expect insurers to reflect differential levels of risk in their terms after March.”


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There are 11 comments at the moment, we would love to hear your opinion too.

  1. I have to confess that I’m struggling to sympathise………

  2. RegulatorSaurusRex 31st January 2013 at 10:12 am

    I’m surprised this wasn’t always the case for all appointed reps.

  3. This gives me some encouragement but the proof will be in the doing, are insurers going to offer Whole Market IFAs preferential terms for clients or not?

  4. @ RegulatorSaurusRex.

    What has the appointed reps part got to do with this? You can still be whole of the market and an appointed rep?

    Unfortunately my Network is restricted panel, however I do not see myself as an agent of the insurer, I am working in the clients best interests at all times so this is absolutely nonsese that my clients have to pay a higher premium through the same provider because my network choses to be restricted?

    @ Sam De Zoysa

    What a selfish comment! Who are you struggling to sympathise with? The client who will have to pay more or the restricted adviser who is getting pushed more and more toward the exit door?

    What you both fail to realise is that the the qualification level of the adviser is not the question here. You could have an over qualified and highly experienced adviser quoting higher premiums for the same policy as a newly qualified IFA on their first ever sale! Just because of the network choice to be restricted. Quality of advice is not being questioned here its whether you are fully independant or not? This is WRONG!

    Get a grip and smell the coffee.

  5. The ludicrous thing in all of this is that I have worked with many ‘IFA’s’ who use the independent tag as a sales tool whilst recommending the same old products that they are comfortable with. Clients who think that by going independent their adviser is searching the whole market are severely misled. I have seen many an adviser find a single USP for a product and then use this as a reason to sell their favourite contract despite whether that USP benefits the client in any demonstrable way, the decision more than often comes down to which BDM they get on with and who is going to take them out for a round of golf

  6. The reality is that now you can walk down the High St and get two different prices for the same product from the two different IFAs just because of the network they belong to. Its usually loaded premiums due to commission rates agreed

  7. For a change I can understand it. It’s a higher premium for higher responsibility. The insurer is (if I am interpretating this correctly) bearing the responsibility and they should be less able to refuse a claim. In theory.

    If your unhappy with your network…. Move! or put in the additional work and become independent.

    I also agree that the IFA tag is little more than a sales tag nowadays. Professionalism and experience is the secret to good advice not always the level of accreditation.

  8. Ignore Tom – he just needs to fill column inches. This already happens as part of the market conduct risk estimation that most (re)insurers include when reviewing prices for different channels, sources of business etc etc. As the Law Commission estimated, this is just a tweak to overall price and is significantly smaller in impact than a volume based commission adjustment.

  9. Jerry, you are spot on

    Higher commssions for volume + marketing allowances for appearing on a panel = higher premiums for the customer.

    Compare the costs of the same products in the intermediary market compared to estate agents

  10. There is already greater scope for innovation in product and customer journey for sales through so called “Restricted Advice” channels and this should further encourage such innovation. There is a great opportunity to embrace and adapt to this new legislation.

  11. I don’t think clients buy life cover from IFAs based on price. if price was a concern they would go to a comparison website – they buy because its part of your financial planning process and advice. I don’t think restricted advisers are being shunted out there is always the opportunity to sacrifice a little commission to bring the premium down in a competition scenario and personally I would rather not be an agent of a client who doesn’t fully disclose medical issues and then get caught up Ina non claim scenario. I am not a medical expert and don’t, want to run this risk. anyway we’ll all have to charge fees for selling protection products before long.

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