The letter contains proposed guidance and highlights concerns the FSA has around the fair treatment of customers. It also asks firms to think carefully about whether they are introducing, arranging or even advising customers on purchasing a contract of insurance and whether they need to reflect that with a change of permissions.
The letter follows a review conducted by the FSA during the third quarter of 2010. The objective of the project was to clarify the aggregators’ business models focusing on general insurance services and the inherent risks.
The FSA proposed the guidance because they found there to be a lack of understanding within the industry about the regulated activity being conducted by firms leading to failures to comply with FSA rules which could lead to consumers not being treated fairly.
Firms have until 8 August 2011 to respond to the proposed guidance.
The FSA are asking firms to:
· Review their regulated activities; ensure they are appropriately authorised or otherwise exempt.
· Ensure they only enter into contracts with firms holding the appropriate authorisation and permissions to conduct that regulated activity (or who are exempt).
· Withdraw their assistance from third parties if the party is in breach of the general prohibition.
· Review their disclosure documentation, sales procedures and terms and conditions and make sure that these are compliant with all relevant regulatory requirements including its Principles, Insurance: Conduct of Business sourcebook and the Unfair Terms in Consumer Contracts Regulations 1999.
In particular, they should ensure they comply with requirements on:
o customer eligibility;
o status disclosure;
o advice suitability;
o providing a proper statement of demands and needs; and
o do not seek in their terms and conditions to exclude liability for the regulated activities they are undertaking.
The British Insurance Brokers’ Association responded to the action by the FSA stating that it is delighted that points that BIBA had highlighted in regards to consumer detriment from comparison websites in 2008 are being recognised.
Eric Galbrath, chief executive of BIBA, said: “Our concerns from 2008 have focused on the gap developing between the pace of technological change and the regulations which were written in 2005. We are pleased that the FSA recognise the price comparison website activities to be more than simply introducing and we trust that the steps that they are taking will close this gap.”
Graeme Trudgill, head of corporate affairs at BIBA, added: “For the FSA to say that comparison websites are falling short of their regulatory requirements is of great concern and we strongly believe that these recommendations must be implemented by the sites without delay. We think it is particularly important that the FSA has highlighted a concern that we share, where in many cases questions are pre-populated with default answers.”
Andrew Montlake, director at Coreco, added: “Many people who go to a comparison website assume that going through a couple of basic questions means that the lowest rate they find is the best rate for them but that’s not always the case and it can cause issues.
“The whole scope of advice needs to be looked at very carefully and it needs to be made very clear for people. No kind of advice is necessarily given on a comparison site. It’s good the FSA has recognised this and will make firms take responsibility.”
