Only a handful of larger financial adviser firms will offer PMI or similar protection products once ...
Only a handful of larger financial adviser firms will offer PMI or similar protection products once general insurance is FSA-regulated, argues the GISC, because the cost of training and administration will be too high compared with the potential remuneration.
Responding to the FSA's CP160 on regulating the mortgage and general insurance industry, the General Insurance Standards Council argues companies will find it hard to justify the cost of training and employing advisers dealing with "higher risk" products requiring more regulation and compliance, because many such as policies are sold to clients as add-ons rather than as priority policies.
The GISC argues it is not necessary to require advisers pass formal qualifications specific to protection products, because it believes PMI is no more higher risk than any other product and "in-house training facilities and one-to-one training can be equally effective".
In particular, the GISC says protection products tend to be of "marginal importance" to advisers and therefore does not justify high levels of requirements on advisers.
"The general insurance industry has always found it difficult to attract, and retain, staff. We are concerned about potential consumer detriment which may be caused by a substantial reduction in advisers," says the GISC.
"The nature of PMI, for example, as a "nice to have" products, which is of marginal importance to many intermediaries, would mean that dropping the products might be preferable to meeting onerous regulatory requirements. Such a decision might…be forced upon firms as staff move to other forms of insurance rather than accept the exam obligation. It is quite possible that only a few large specialist companies would remain, with an attendant restriction of consumer choice," adds the GISC.
Along with pointing out the potential damage to adviser numbers, the GISC has also challenged the FSA's definition of "independent" and its subsequent impact on depolarisation, because most non-regulated intermediaries do not currently have access to the whole market of products and providers.
"We would encourage the FSA to impose restrictions on the use of the term "independent" to avoid misleading customers. We do not believe, however, that FSA should limit the use of the term independent to insurance intermediaries who offer a "whole of market" service," says the GISC.
"Most independent intermediaries in the general insurance market do not have access to the whole of the market, although this does not mean that they are unable to act as an independent intermediary in common law, or provide the most suitable policy for a customer," continues the GISC response to CP160 on mortgage and insurance regulation.
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