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Richard Verdin on Protection

With the benefit of hindsight, I guess most mortgage advisers wish they had taken a month’s holiday starting on November 1. If they had, they might well have avoided the business issues caused by a number of lenders in dealing with key facts illustrations and adviser registrations, which together with the slowdown in housing transactions combined to make November the worst month on record for many small mortgage and insurance businesses.

As the same advisers are responsible for arranging the majority of life insurance sales and a large number of general insurance sales, including buildings and contents insurance and accident, sickness and unemployment cover, they must now be looking forward to January with a huge degree of trepidation.

Can we expect reports in January of insurance companies failing to deliver compliant KFIs and fouling up adviser registrations? Can we expect to hear of insurance sourcing systems failing to deliver and of being so overwhelmed by inbound calls that they cannot even answer their telephones? I am anticipating difficulties but not across the board as I expect some companies to manage better than others and with good reason. I expect the composites to manage the introduction of statutory regulation well because most of them had until recently been abiding by adopted Lautro rules stating that term insurance should be treated as a regulated product. In fact, many insurers have only had their FSA rule waiver for term products for a few years and had not actually got around to making changes to their systems when the prospect of regulation was announced. It is for this reason that January 15 should not cause too much concern for term-only insurance providers. The same applies for those general insurers also active in term insurance as they have access to colleagues with experience of regulation and access to the systems, which should place them in a comfortable position.

That leaves the companies that only offer general insurance products and here the news may not be so good, simply because for them, just like the lenders, statutory regulation is much more of a deal because it is all new and therefore mistakes are more likely.

Of course, there will be providers which have never been regulated but which keep things simple and breeze through the changes. However, any mistakes made by individual providers will be felt far more acutely than those experienced with the lenders. This is because there are far fewer insurance providers active in our market and, therefore, skirting their issues will not be as easy, as deals are harder to replicate for customers simply by switching providers.

As for sourcing systems and KFIs, unlike mortgages, most life
quotations are performed online, with the premiums and documentation obtained directly from the providers and simply served through such
systems to advisers. Life insurance sourcing systems therefore
probably will not add to difficulties, instead they will simply
reflect problems experienced by individual providers.

With general insurance quotes, things are a little different again as
most premiums are sourced offline. No doubt issuing revised discs to
all who want them on time will place some strain on the bigger
companies as will version control issues for a few weeks following
the introduction of regulation as some brokers inadvertently use the
wrong discs.

Having lived through the introduction of one lot of regulation during
November, I hope that for all our sakes the insurance providers cope
a little better than some of their big-name counterparts in mortgages.

Richard Verdin is sales and marketing director at Direct Life &
Pensions

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