IMI Magazine

IMI Magazine

Insurance compliance


The countdown continues

New regulations governing the sale of general insurance – which have critical implications for the motor trade – are due to be enforced by the Financial Services Authority from January of next year. Charles Hanks, operations manager of training provider Autavis, provides this update on compliance procedures.

Make no mistake, non-compliance with the impending laws on sales of general insurance will be a criminal offence and, yes, under certain circumstances those under the approved persons regime can face imprisonment. In truth, though, by following some simple actions protection of your business, your customer and yourself is perfectly achievable.Most people come to the conclusion that help is needed, and after stretching the stationery budget in attempting to print off the ICOB (Insurance Conduct of Business sourcebook) they turn to external sources. There are many ‘experts’ and seminars around offering assistance for those who wish to learn more about compliance. Although the message is occasionally inconsistent, one inescapable requirement is the need to fill out an application form for FSA submission. Depending on your size and insurance income you may have to submit a business plan together with the primary application forms HSF 1 & 2. The deadline for guaran-teed consideration passed on the 13th July. Although you will have no guarantee of getting your permission back in time if you missed this date, you should still submit the application as soon as possible to minimise any delay.In truth, as long as the application has been submitted by this stage you are as far along as you need to be. Whilst it would have been prudent to give some thought and planning to other compliance issues (such as professional indemnity insurance, transfer of risk and training), there are no deadlines associated with these that are not dependent on the specifics of each business and its size. There are, however, many questions that need to be asked at this stage. A few of the more commonly asked would be:

Q) Who will be involved in recommending insurance within the sales department?Q) If insurance is currently sold from the service department, is it financially viable to continue doing so? Q) Will my insurance providers agree to transfer of risk?Compliance - real world implementation With regulation fast approaching it’s time to put aside the theory of ‘what ifs’; now is the time to start implementing the changes to your business.Once a commitment has been made to remain compliant the next step is to analyse current business practices. This will help decide how selling processes will need to change. If there is a sales process already in place, regulatory training can be dovetailed into this to ensure compliance. Without a sales process, integration is far more challenging because compliance relies heavily upon the controls and discipline that support and encourage sales staff to follow a consistent process with every customer. It allows managers to effectively audit each sale as it progresses and highlights non-compliance when and where it occurs. The practicalities of conducting status disclosure, document serving and demands and needs all point towards the requirement for a step-by-step sales process.In order to recommend insurance products the ‘advised’ members of the sales team need to have an adequate knowledge of what they’re recommending. Many people have already addressed their product mix as a result. Portfolios have slimmed down and focus placed on key opportunities within the business, thus allowing sales staff to concentrate on establishing the need for one product without then having to justify its selection against all the products offered.One reality-check is that in the fast moving and demanding world of the motor industry, mistakes will happen. Furthermore, under these regulations, we all have a responsibility to ensure that when those situations we strive to avoid do occur, they are identified, resolved and prevented from happening again. Internal auditing, mystery shopping and the revision of contracts for both advised and non-advised staff should be considered as a few of the actions that will help achieve this.Finally, a strategy that is becoming increasingly popular within the industry is an early ‘go live’ date. Why wait until the 14th January to put all the processes, controls and documentation in place? It may be the first day you realise they don’t quite work. It could also be the first day the FSA walk through your door. By acting as though regulation is in force from 1st November, it gives businesses 10 weeks to rigorously audit their practices and amend where necessary. Where mistakes are made, actions can then be taken to fill gaps in knowledge and training without the risk of failing compliance.