With all the furore surrounding the FSA’s CP98 and the rush to get qualified in time for the MCCB’s 2002 deadline, one very important issue facing mortgage advisers has been overshadowed.
That is the decision of whether or not to join the GISC ‘ the new regulatory body for the sale of general insurance. Mortgage payment protection insurance contracts and buildings and contents insurance will both fall under its remit and so any adviser that wishes to offer independent advice on these products will have to sign up.
For many advisers, this will not be an easy decision to reach. With the new regulator comes another set of membership fees, new minimum finance and professional indemnity stipulations, training requirements and customer practice codes to satisfy.
In other words, an awful lot of work for what probably accounts for a small proportion of your business.
Ultimately, each firm has to decide whether the benefits of remaining in these markets outweigh the costs of satisfying the regulator.
It will be necessary for intermediaries to consider the opportunities these products present. In an increasingly competitive marketplace, and with the loss of endowments, can advisers really afford to ignore the potential income that can be earned from the sale of associated general insurances?
There are alternatives for advisers that do not wish to join the GISC but want to continue earning money from general insurance. Advisers, for example, can become appointed agents for member insurers enabling them to sell products on behalf of a member insurance company ‘ in effect becoming a form of tied agents. Or, they can act as ‘introducers’ and literally introduce products by passing on client details to the insurer, receiving a commission for successful cases. A number of providers have come forward to offer advisers introducer status for products such as MPPI and buildings and contents.
This may be an attractive option, particularly for those that are already tied on the life side of their business.
But, advisers that promote independent advice owe it their clients to ensure they buy the most suitable product. Only with a full fact find and a thorough comparison of products available can advisers be confident they are recommending their client the best deal. And clients need advice to ensure they understand how the plan works, what it covers and, most importantly, what is not covered. This is where the independent broker can really add value to the sale.
Clients come to such advisers for independent advice. By acting as an appointed agent you can only offer advice on the products of one insurer and by acting as an introducer you cannot even offer advice.
Both routes compromise the position of the independent adviser ‘ that is the ability to provide impartial advice on any product in the market.
There is no doubt that the GISC will bring with it the hassle that is usually associated with regulation. But for IFAs that wish to advise on MPPI or buildings and contents, or indeed any other general insurance product, and maintain their independence, there is no alternative.
Following an appeal by the Institute of Insurance Brokers and the Association of British Travel Agents the application deadline for GISC membership is temporarily on hold. But, while this has afforded advisers some breathing space, the GISC remains a reality they should not ignore ‘ a decision on whether to join needs to be made and sooner rather than later.