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.”