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Rules on Conduct of Business
The Financial Services Authority (FSA) code on the conduct of business contains guidance for financial service providers including firms engaging in insurance mediation in respect of a life assurance policy. The insurance intermediary is required to provide the client with basic information such as its name and address, FSA registration number and disclosure of whether it has a 10% holding (voting rights or capital) in an insurance undertaking other than a pure reinsurer, or if an insurance undertaking has a 10% holding in the firm.
The firm must inform clients about the procedures for registering complaints about its services either with the firm itself, with the Financial Ombudsman Service or through out-of-court complaint and redress procedures. Regarding the life insurance policy supplied by the firm to the client the firm must tell the client whether it is giving advice based on a fair analysis of the market. If the firm is contractually obliged to do its insurance advisory business with one or more particular insurance providers their names must be given to the client if requested.
Where the firm tells the client that the advice is given on the basis of a fair analysis of the market, this analysis must be given based on a sufficiently wide range of life policies to enable them to make a recommendation of a particular life insurance policy for the client.
Before any life policy is concluded, the firm must clarify its understanding of the client’s needs and what the client is asking for, as adapted to the complexities of the relevant policy. Information must be communicated to the client in a durable medium accessible to the client (not just verbally), must be clear and comprehensible and in the appropriate language. In the case of selling by telephone, the client must comply with the distance marketing disclosure rules, including the provision of appropriate information when the life insurance policy has been concluded.
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The Financial Ombudsman Service (FOS) is a single ombudsman scheme for all regulated financial services under the authority of the Financial Services Authority (FSA). Membership is compulsory for insurers and the ombudsman’s decisions are binding on financial services companies, although not on consumer complainants. The FOS has jurisdiction to consider complaints arising out of policies taken out with member companies by or on behalf of individuals, and underwritten within the UK and governed by UK law. As part of the move to statutory regulation of intermediaries, all brokers must join the FOS. All financial services businesses authorized by the FSA are subject to the decisions and procedures of the FOS, but consumers have to seek a resolution to a complaint from a company in the first instance. If the matter is not resolved satisfactorily, they can then ask the ombudsman to intervene. A complaint form is available from the FOS website. The Financial Ombudsman Service does not investigate a complaint until the financial provider has been given at least eight weeks to resolve the complaint from the customer.
The Pensions Ombudsman is a statutory appointment made by the Secretary of State for Work and Pensions in accordance with the Pensions Schemes Act 1993 and the office is unaffected by the enactment of the Financial Services and Markets Act 2000 (FSMA). The role of the Pensions Ombudsman is to investigate disputes and complaints concerning occupational and personal pension schemes, and any decisions are final and binding, and enforceable in a county court. Consumers may complain to the Pensions Ombudsman about the manager of the occupational or personal pension scheme, which in many cases may be an insurance company. After receiving information and comment from the parties, the Pensions Ombudsman issues a final determination which is binding on the parties, though an appeal may be made to the Courts against the Ombudsman's decision.
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Retail Distribution Review
The Financial Services Authority (FSA) has established the Retail Distribution Review (RDR) as a part of its strategy for protecting consumers. The review aims to ensure that consumers are subject to transparent and fair charges for the advice and service they receive, that they are clear about the service they are receiving and that the professionals who give them advice are adequately qualified. The RDR is due to be implemented from 31 December 2012 and the reform will establish two main types of financial services adviser. The independent financial adviser will offer financial and insurance products from the whole of the available market and will be qualified to a certain specified level. The sales adviser will give advice from one provider or from just a few providers. This distinction will be made clear to customers. As a result of these reforms, the customer in the life insurance market will be further protected because the status of the insurance adviser will be transparent and full information will be available to the customer about the type of service being provided and about the particular product that is being sold to the customer.
UK Life Insurance Distribution (Intermediary Disclosures and Consumer Protection)
These articles complete the guide to the UK life insurance distribution market (the first four published in February). The first deals with the IFA market (the most successful in the UK) plus other distribution methods whilst the second deals with consumer protection and intermediaries commissions.