The Institute of Insurance Brokers has levied an attack on banks and major financial services retail...
The Institute of Insurance Brokers has levied an attack on banks and major financial services retailers saying that they have 'unduly influenced' the FSA in the polarisation debate and that the regulator must consider the point of sales consequences of general insurance to consumers.
"The banks and major retailers want multiple-product non-advised sales, because it has far more to do with their bottom line profit than customer care," said the IIB, in its response to the consultation paper 160 on general insurance regulation.
The IIB argues that non-advised sales are not working in the consumer interest for mortgages offered by banks, according to information provided by 'real people'. The Institute outlines the common experience of individuals, presented with a number of mortgage options, who are surprised when the bank teller is unable to provide advice.
But if the customer can be 'gently persuaded', continues the IIB, then the bank teller can scoop up the credit towards his bonus instead of referring it to one of the bank's mortgage advisors. From the mortgage experience of non-advised sales, the Institute is keen to avoid similar circumstances arising in general insurance.
A further complication with the FSA's proposals to provide non-advising sales for the marketplace of general insurance, is the fact brokers, under competitive profit margins, may be squeezed out of the lower-end of the market.
With brokers forced to only offer advice to high net worth personal clients, other consumers are left to decipher the 'small print' which could open up risks, says the IIB.
The Institute is also against the dilution of the term 'independent', which it says has taken over a decade to hammer home to consumers. "We do not believe that any multiple product advised sales offerings could be properly described as being 'independent' in the absence of bespoke advice being given.
"Therefore, in our opinion, the term 'independent' should be restricted to brokers/intermediaries who can demonstrate their independence with regard to risk carrier selection, product selection and the provision of individual client advice."
Commission disclosure is also a thorny issue for the IIB. The Institute argues that while brokers, acting like agents, are required to disclose commissions, retailers are able to keep their margins confidential.
The IIB provides an example of Super Direct Motor Insurance, which in advertising says, "we do not pay commission to middleman". But the Institute points out that it fails to disclose that its customer acquisition costs and service costs are 35% of the premium.
"Should the FSA introduce non-advised sales in the general insurance market (which we are against), would this represent a client/agent or, customer/retailer relationship?" asks the IIB.
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