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Providers deny insurance laws will push up costs for restricted clients

Insurers insist they will not charge higher premiums for protection business written through restricted advisers following the introduction of new insurance laws.

Last week, Lifesearch said insurers are likely to charge higher premiums for business from restricted advisers than policies written through whole of market advisers when the Consumer Insurance (Disclosure and Representations) Act comes into force in April.

The Act will remove the assumption the adviser always acts as an agent of the consumer. 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 as the insurer’s agent 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.

Lifesearch chief executive Tom Baigrie argues as the restricted channel will be more expensive for insurers, the premiums are likely to rise.

PruProtect, Bright Grey, Scottish Provident, Ageas, Aviva, Aegon, Friends Life and Zurich say they will not charge higher premiums when the act is introduced.

Aviva protection director Richard Verdin says: “Tom’s point is entirely logical but this has already been largely factored into pricing.”

LV= and Legal & General refused to comment.

Baigrie says: “Individual insurers will not ever publicise their pricing strategy ahead of the event but the differential risk and claim level caused by the legislation will become real from March, so we will see.

“The difficulty will be getting insurers to publicise the difference experienced between the channels. Notwithstanding that, as an independent, I will certainly be asking that the risk LifeSearch lifts from the insurers’ shoulders lead to discussions about more favourable terms.”

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Comments

There are 2 comments at the moment, we would love to hear your opinion too.

  1. Everyone is surely agreed that pricing differences already exist between independant and restricted advice channels.

    Distributers will usually try to negotiate improved terms with providers but this isn’t primarily about factory gate pricing. The new laws should be a catalyst for product/proposition innovation, particularly in bespoke restricted advice channels.

  2. So Tom, does that mean that your advisers are not paying meticulous attention to detail at present but will only deem this necessary when your firm are held responsible for the accuracy of applications from April? tut tut.

    Unless your company is not submitting applications in a compliant manner (which i am sure is NOT the case) there should be no difference to your process. So looks like a bit of petulant back chat from you now that your scaremongering rumour of price hikes has been kyboshed.

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