David Quick says that just because ‘Mortgage Day’ has come and gone doesn’t mean brokers can take their eye off the next major development – ‘General Insurance Day’
At long last the introduction of mortgage regulation has happened – we can all get on with the task of bedding down new operating systems and generating new business. There have been a few hiccups with sourcing systems and the FSA being slow to issue some brokers with registration numbers but the initial glitches are being resolved - slowly but surely.
I’m sorry to say this but you can’t afford to sit back and let out a collective sigh of relief just yet. On 14 January 2005 the next piece of the regulatory jigsaw is being put in place – the regulation of the general insurance market.
Insurance directives
GI regulation has been delayed for three months after ‘Mortgage Day’ simply to allow time for the industry to get to grips with European insurance directives. Don’t misinterpret the fact that GI regulation follows mortgage regulation as meaning that it is in any way secondary to, or less important than, mortgages. GI regulation is inextricably linked to mortgage regulation – you cannot sell mortgages without considering appropriate insurance cover for your clients.
A number of you will have made your decision about GI regulation at the same time you made your decision about mortgages (a very sensible thing to do) but not everyone has. If you are directly authorised for mortgage business you need to ensure you are also authorised to handle GI business. If you have not yet submitted your application you are leaving matters terribly late – GI regulation happens two weeks after we return from holidays in the New Year, so don’t think this is something you can leave until the Christmas break to sort out.
FSA warning
Sarah Wilson, director of the FSA’s High Street Firms Division, issued a warning recently when she said: “‘General Insurance Day’ - 14 January 2005 - is now only two months away. Many general insurance firms that acted promptly have now received notification from us of their future authorisation and can carry on their business into next year.
“However, while the numbers of applications from firms selling general insurance as a secondary activity are rising slowly, we are increasingly concerned that such firms are not applying for authorisation in sufficient numbers. Time is running out and rapid decision-making and prompt action is now essential. We will continue our communication work - all secondary firms that have registered but not applied have, for example, recently received a direct mailshot from the FSA. The general insurance industry can also help itself by re-doubling communication efforts – not least as our data show that the most effective prompt for registrations from secondary intermediaries is contact from their product provider.”
Don’t worry Sarah, CETA is doing its bit to encourage brokers to take action before it is too late.
Check the details
If you are an appointed representative (AR) of a network, general insurance will most probably be part of the package provided by your Principal, but do check if you are at all unsure. The reality is that it is very difficult to sell a mortgage if you can’t also provide your clients with advice about appropriate support insurances.
Please also bear in mind that, in a regulated GI market, you need to make sure you have assessed the risks your client faces and have recommended appropriate insurance products. You cannot simply reach for one or two standard insurance policies which cover most eventualities.
Your client may, for example, have a job which will pay his or her salary for six months in the event of accident or illness. Selling an MPPI policy with back to day one cover would therefore be inappropriate – you must find a policy with cover that matches your client’s requirements. Such policies do exist but do you know how to find them?
Access technology
This requirement means that you need access to appropriate technology to help you find the best product for your clients needs. Insurance is no different to mortgages in that systems exist which can match products to your clients needs, generate quotes, submit applications, provide compliant documentation and even link seamlessly to your mortgage sourcing software, so that you don’t have to input the same client data twice.
I’m not trying to push you towards one GI compliance package over another but I do want brokers to give GI regulation the attention it deserves. Insurance cover is important for your clients – if you don’t sell them cover they will go elsewhere and get it – and it can also generate a healthy additional income stream for yourself. How many mortgage products do you know which pay renewal commission each year?
Intrinsic element
The truth is that general insurance is an intrinsic part of every mortgage deal and the sooner you prepare for the onset of regulation the better. Even if you only deal with unregulated products such as buy-to-let mortgages and secured personal loans, you still need to be authorised to sell associated general insurance products.
Many brokers left arrangements for ‘Mortgage Day’ awfully late and some have been suffering the consequences. Please don’t make the same mistake with GI.
David Quick is managing director of CETA
