Attending a conference last week, I listened to provider CEOs say one after another that unless “we get our house in order” the FCA would soon adopt a tougher approach to its regulation of protection and I was struck by the contrast between the public words and points many of the same tribe recently made in private to me.
Behind closed doors, I was told quite clearly providers do not wish to self-regulate their own distribution.
They see that as very much the regulator’s job. They say their responsibilty is to ensure that distribution is financially viable and has a profitable model, so that their future balance sheets are not damaged by un-repaid clawback of commission, as has happened often in the recent past. But there is no sign that their appetite for responsibility extends to ensuring that consumers who buy providers’ branded products routinely end up happy and pleased with their decision.
I’m afraid, Dear Reader, I was reduced to unprofessional heckling of the esteemed gents, who were described as leaders, but who, with their peers, refuse to stand out from the crowd and drive reform, preferring instead to sit in the back seat as the road to destructive regulation drifts by.
I see the issue at provider board level as being a refusal to invest properly in tackling the challenges of our industry as an individual brand. Safer to stay in formation rather than break ranks on issues where doing the right thing will antagonise some important partners.
Yet all the speakers on the conference platform agreed that that was a false safety; that if they kept doing that, the FCA would make the situation really unsafe. We have seen that in the world of what is now pejoratively called inducements, where proper support of distribution efforts to serve consumers better is now being caught up in quite proper an FCA attack on junkets and soft commissions.
The widespread fear is that all this will eventually lead to an FCA ban on indemnity or all commissions.
In truth, I do not think that is the threat. Commissions are a consumer requirement of a non-investment linked protection market as well as the huge GI market, remaining intermediated.
This point is well evidenced by the chaos and consumer detriment in the Dutch market – where, I am told, protection is now almost entirely the province of mortgage brokers and bancassurers and consumer choice is greatly restricted and value worsening.
Commission paid on properly made sales, whether advised or not, to properly run distribution businesses big or small, is not a problem but where it is improperly paid to those who do not treat consumers well it surely is a huge issue.
That is what needs to be eradicated by those provider CEOs and, as they now boast about their claim stats, they should one day boast about the quality of their distribution panel and how high they set the bar, no matter the channel.
The truth is that no single distributor or even group of distributors can “get our house in order” to the FCA’s satisfaction if providers remain happy to pay and profit from those who do not do things properly.
The power to do so lies with the dozen or so providers who control the market and perhaps really with the smaller number who control the vast majority of it.
The ABI has long made clear that reforming members’ practice and producing codes of conduct is absolutely not within its remit, it exists to do its members bidding.
Perhaps those members could ask it to help them get our house in order or form another group designed to do just that.
Tom Baigrie is chief executive of Lifesearch