Tony Corrigan, managing director of Classic Network Solutions, said if brokers wish to know if their network is one of the perpetrators selling ‘FAT’ products, they should contact him if they don’t want their business’ reputation to be damaged.
He said: “A FAT product is where an insurance policy premium is increased purely to allow for increased commission to be paid.” Corrigan added that he knew of one life company which has agreed with two new mortgage networks to increase the commission paid by increasing the premium over and above normal commission levels paid to the rest of the industry.
“I am dismayed that at a time when the FSA is promoting hard that an underlying ethos of all financial services businesses should be to treat customers fairly that the practice of allowing FAT products to be sold still exists.”
He added: “The company in question would argue that it is not its problem as it has been asked to provide a service at a certain price with sufficient profit margin to satisfy everybody. And there is certainly merit to this argument. However, how can the FSA allow this practice to continue when a client is paying over the odds for a life product?”
Corrigan said if the life companies haven’t got the guts to stop the practice and if the FSA didn’t feel it was break-ing the spirit of Treating Customers Fairly, then it was time for advisers to stand up and be counted. “Check if your network is undertaking this practice and if so lobby to change it. If they are not willing then vote with your feet,” he said.
