The Financial Services Authority has reported a positive outcome to its recent investigation into the level of unauthorised general insurance business being conducted since regulation was introduced in January 2005.
The FSA visited more than 1,700 firms around the country it thought were potentially conducting insurance mediation activities illegally, according to an FSA report.
This included visits to both potential primary intermediaries – brokers who sell insurance as their main business – and secondary intermediaries – firms who sell insurance as a secondary activity to their main business.
Yet the FSA found only two primary intermediaries and 14 secondary intermediaries were wilfully acting illegally.
The FSA says it has been working with the firms, where breaches found were inadvertent or resulted from genuine misunderstanding, to ensure they stopped doing the business, became authorised or restructured their business so they did not need to be authorised. In other cases, the FSA took steps to stop them conducting any further insurance business.
Clive Briault, FSA managing director for retail markets, says: “Policing the perimeter is a vital part of our work to protect consumers, who do not have the safeguards of regulation, or access to statutory redress and compensation, if they deal with unauthorised firms.”
Briault adds the FSA has been impressed with the level of understanding of the new rules in both the primary and secondary insurance markets, as most firms are aware of the need to be authorised if they undertake regulated activities.
Malcolm Tarling, a spokesman at the Association of British Insurers, says the results are very positive, particularly since the industry has only been regulated since January.
He adds: “The results are a sign of the industry’s commitment to regulation.”
Likewise, Tracey Mullins, director of public affairs at the Association of Independent Financial Advisers (Aifa), says the survey is “good news”.
Mullins says the Association of Mortgage Intermediaries has played a part in making sure its members who are involved in mortgage protection got to grips with the rules and understood they needed to be authorised.
Steve White, head of compliance and training at the British Insurance Brokers Association (Biba), also adds: "We are pleased with the outcome of the FSA investigation. We were actively involved with our members in the run up to the commencement of regulation, encouraging them to look closely at their distribution channels and to make sure that they only dealt with firms that were going to become authorised.
"The result of the FSA investigation shows how seriously Biba members have taken on board this aspect of regulation. The result clearly is not only good news for our sector, but good news for consumers."
The FSA undertook a similar perimeter exercise with the mortgage sector earlier this year and says it will continue to monitor both the mortgage and general insurance markets and will follow up leads, where appropriate, to prevent firms operating illegally.
If you have any comments you would like to add to this story or would like to speak to its author about a similar subject, telephone Emily Perryman on 020 7968 4554 or email [email protected].IFAonline
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