REGULATION

During the run-up year to FSA regulation, several non-general insurance advisors commenced plans to sell products such as motor, household and life insurance on a non advised basis. This was curious because it was

But events change and it turns out that the original view was right, and non-advised sales are permissable - a bad move by the FSA for consumers believes Andrew Ferryman of bestdealinsurance

There's no doubt that the regulations relating to advised and non-advised sales of insurance are letting consumers down. The irony is that these are the very regulations put in place to protect the customer, with the aim of making policy issues more transparent for them. Yet many buyers are now left financially vulnerable due to the numbers of providers selling insurance on a non-advised basis.

In January 2005 the FSA ruled that sales of insurance could be carried out in one of two ways - either on an advised basis, or as a non-advised sale. With the former, a qualified salesperson gives substantiated recommendations along with legally binding documents. Should something go wrong with the policy - for example if it proves to be unsuitable because it does not fit the client's needs - then they can sue for wrongful advice.

However on a non-advised basis, a qualified salesperson is not required. Nor is any documentation necessary relating to anything discussed. The customer makes their own decision as to what policy is best for them, leaving the salesperson and their company with no comeback should it all go wrong.

Selling insurance on a non-advised basis is obviously more attractive to the majority of banks, building societies and to some insurance companies. There are fewer costs involved as qualified staff are not required, and there are very few ramifications should their customer buy an unsuitable policy from them.

During the sale of insurance on a non-advised basis, any conversation between salesperson and client about the different products available - even without giving advice - will inevitably be influential on their choice of policy. It is difficult to envisage any other result since it is impossible to have such a conversation and not be influenced.

With so many lenders and brokers tied to a particular insurer, the consumer is still being pushed into buying a policy that may not be right for their circumstances.

The long and the short of it is that the very regulations that have benefited the providers who sell on a non-advised basis and were set up to protect the customer, are leaving them wide open to choosing an unsuitable policy.

Sadly consumers are unaware of the implications of not taking proper advice from an independent broker. While they may find what looks like a good insurance deal with cheaper premiums than they have seen elsewhere in the market, in the majority of cases it is false economy - as they may well find out when their claim is rejected.

There is already a growing file of case studies proving this to be the case. There are examples of travel operators selling travel policies on a non advised basis to over 50s holidaymakers who are under medication, where their cover proves worthless in the event due to non disclosure of material information.

Now that the FSA has legitimised non advised sales, consumers who inadvertently find themselves following this route could regret it later. And this possibility raises the question as to whether it should even be possible to sell any insurance policy on a non-advised basis.