As a group, brokers generally tend to stick together when it comes to regulations or political issues, such as the new regulations that the FCA are planning on implementing within the industry in the near future. However, the EU Referendum is a completely different story, and it seems as though even brokers haven’t escaped the split in opinion that has spread across Britain. Continue reading
Last month, Victor Millwell published an article on the British Insurance Brokers Association’s (Biba) 2016 manifesto which outlined their areas of focus for the year. One of the most prominent points in Biba’s 2016 manifesto was “Regulation” as the association continues to work with the FCA to find a balance within the industry. Continue reading
With the coming of a new year it’s often common for respected companies and industry bodies to release their plans and predictions for the next twelve months. However, in the brokerage community there is one organisation whose manifesto we all take a keen interest in: BIBA. Continue reading
As a motorhome insurance broker, you will likely spend a large amount of your time keeping up to date with legislation and directives that are published on a regular basis. However, this is not always an easy job, which is why in this month’s article Victor Millwell investigates the new Insurance Distribution Directive (IDD). The IDD was adopted by the European Parliament on the 24th November 2015 and the Council of the EU on the 14th December 2015. The IDD has been altered so that it can replace the current Insurance Mediation Directive (IMD) which has been around since 2002. These new rules will regulate EU insurance brokers, agents and other intermediaries alike. These changes to the IMD were prompted by: • A larger focus on buyer protection across all financial sectors since the 2008 credit crunch. • The advance of the insurance market and product offerings since the IMD was first implemented. • Member states being inconsistent in the way in which the IMD regime had been actioned.
The IDD is a “minimum harmonization directive”, simply meaning that it sets a threshold in which national legislation must meet. Member states are allowed to maintain this or even introduce stricter requirements relating to selling insurance. As previously mentioned, the new IDD will apply to a wider regulation of insurance “distributors” including: • Every kind of insurance product seller, including anything that is sold directly to customers. • Anyone who is involved in assisting with administration or performance of insurance contracts. This includes someone acting on behalf of insurers e.g. claims management activities. • Supporting insurance intermediaries. Insurance expert Alexis Roberts of Pinsent Masons, said: “It is good to see that the IDD’s journey through the European legislative process is progressing at a steady pace. “The IDD has been on the radar for the UK insurance industry for some time and the UK has the advantage of having ‘gold-plated’ the current Insurance Mediation Directive, so requirements will not be felt as stringently as in other member states. It will be important, though, for relevant industry players to keep the new requirements of the directive and its implications for business, particularly for insurers’ direct sales processes, at the forefront of their minds in 2016.” Once implemented, the IDD will require a minimum of 15 hours each year for professional training and development for some involved in the distribution of insurance. This includes “relevant persons within the [distributor’s] management structure” and anyone “directly involved” in insurance distribution. All channels of insurance being distributed should have consistent information and buyer protection in place unless they are not liable due to meeting certain conditions. Insurance undertakings must implement, document and regularly review any internal policies. Furthermore, upon payment, clear information must be given regarding what the distributor will receive for selling an insurance product. The IDD will introduce a general rule that it is essential for distributors to “always act honestly, fairly and professionally in accordance with the best interests of its customers.”
Cross-selling and package products
Any time an insurance product is sold or offered along with another service or in a bundle, the insurer must inform the customer as to whether the different components are available to be brought separately. If they are able to do so then an adequate description of each component should be provided. The new IDD regulations include specific and tighter requirements regarding package retail insurance-based investment products (PRIIPs). The new IDD is very comprehensive so brokers should take time to read all the changes that have been made and start making small changes where they can. There is still plenty of time as the next step is for each member state to enact its own version of the law (i.e. an update of the Financial Services and Markets Act) and this means that it is likely to be at least 2 years before this become effective in UK law. However by starting now brokers can get a head start and be ahead of the game once the law is implemented.
A number of insurers and brokers have been re-evaluating their automatic policy renewals recently due to the amount of customer complaints rising dramatically. When it comes to insurance policies, most customers know when theirs is up for renewal and therefore begin looking for cheaper or more extensive policies during this time. However, there are those that claim that insurers are not always clear enough or do not inform their customers properly about their auto-renewals.
In certain circumstances, customers who are not aware of their auto-renewal policies can accidently end up purchasing a new policy and then find themselves paying for both. This could result in overdrawn bank accounts meaning a potential charge from the bank. This is why a number of insurers include information concerning policy auto-renewals within their Product Disclosure Statements which are usually sent to customers once they have purchased their initial policies.
In order to prevent such situations from occurring and to reduce the number of complaints made to insurers and brokers, a new industry code of conduct is being bought in to protect any “vulnerable” customers such as the recently bereaved and the elderly. This is particularly important due to the fact that Insurance Premium Tax (IPT) and therefore insurance premiums are rising, making the average cost of an auto renewal around £200 a year.
The new code will be put into place for the “vulnerable” which includes the elderly, bereaved and also those with low literacy and mental health issues. It is believed that people who fall into these categories are more likely to pay for an auto-renewal and it is likely that they wont realize that they are paying for it. Regardless of the auto-renewal, the average car insurance price has increased by £13 since quarter 3 of 2015. This means the vulnerable could unintentionally be paying a lot more than they need to be.
The Association of British Insurers (ABI) has stated that in order to protect their customers, brokers need to speak to their underwriters and ensure they are clear with any policy changes that could affect their customers’ fees for next year’s payments compared to the previous year. The ABI states that brokers should also ask for consent when it comes to renewing policies which could hopefully end up saving motorists over £100 a year.
They added: “People with low literacy or numeracy skills, mental health issues, old age or a recent bereavement” will pay extra money needlessly, without realizing.
Here at Victor Millwell we often discuss how insurance brokers can navigate complex regulations to ensure the success of their businesses as well as provide excellent customer service. This change is just another example of where the ABI and customers will be able to determine the good brokers from the bad, as those that already communicate well with their customers won’t have to change much in order to adhere to the new regulations.
In fact, these new regulations could increase the lifetime value of customers if brokers take this opportunity to build up trust with them. Conversely, brokers that aren’t completely transparent with customers could end up damaging their company’s trust and respect.
The new “vulnerable consumers’ code” is voluntary but will apply to policies sold by brokers belonging to the ABI or British Insurance Brokers Association (BIBA). The Chief Executive of BIBA, Steve White, said: “A published code will raise awareness. We are still working through the practicalities of how the code will operate, but we expect it will boost trust in the insurance sector.”
Brokers should also be sure that they are completely transparent about any premium increases when it comes to renewals, as in some cases price increases are not provided to customers either clearly or at all. If customers notice it will, once again, completely damage the trust they have for the broker. Most other companies (i.e. gas and electricity suppliers) are obliged to show broken down information on any price increases however motorhome insurers and brokers are currently not – something that will likely change in the future.
Photo by Pixabay
Brokers have come a long way over the past twenty years, especially when it comes to technology. These days very few insurance brokers work exclusively offline, as going online opens up your business and provides a wider market share.
However, as we all know there are certain dangers associated with working online. You just have to look at recent news stories to see that even the biggest names in the industry aren’t properly protecting themselves from cyber-attacks, which is why all brokers need to start taking the issue more seriously.
Over the past two years there has been a huge increase in cyber-attacks which have raised a number of concerns over the effectiveness of security tools used by businesses in the UK. Unfortunately, even though businesses are spending billions of pounds to strengthen their online security, attackers are still managing to find a way through these blocks.
Discussing the issue, Tom Reagan, a cyber insurance executive with Marsh & McLennan, said: “Some companies are struggling to find the money to buy the coverage they want.” He went on to add that it’s becoming even easier for hackers to buy personal information online: “Criminals are now able to purchase the data for around $1 a line which is $4 less than just under a year ago. The lines of data contain full names, addresses, date of birth, social security number and more.”
Meanwhile, Ron Green, MasterCard’s chief information security offices, said: “Security and product development are not mutually exclusive. We don’t look at security as being a solo responsibility. Our executive team has the expectation that we build security into everything we do as a standard practice. [Security] is table stakes for customers now, and you’re expected to deliver.”
Even though all businesses need to take the threat of cyber-attacks seriously, insurance providers in particular are required to take extra care as they hold sensitive, personal data about their customers including addresses, bank details and more. Furthermore, by law insurance companies must take appropriate steps to protect this data – even more so now that number of cyber attacks are on the rise. The Information Commissioners Office also has the power to issue fines to anyone who doesn’t comply with the required safety measures.
As a motorhome insurance broker you may feel that the data you store is not as sensitive as that of say, a broker that specialises in life insurance. However, the truth is that these days even a small amount of information can be used by cyber criminals to access bank accounts and/or commit identity fraud.
In order to protect your customers’ data it’s important that you keep up with news concerning cybercrime and how new or advanced malware could potentially harm your business. As a broker, one of the last things you need is your customers’ data being leaked, which is why it benefits both you and your customers to stay safe online. It is also essential that any business processing card transitions must be PCI compliant so that any payment card data is protected by the PCI Security Standards.
To that end, it may be wise for motorhome brokers to remind their customers on how to stay safe online. For example, you could ask them to call you if they see anything suspect or out of the ordinary on your website as well as not enter any personal details if unsure. Not only will this prevent hackers from stealing your customers’ information, it can also build trust with your customers and secure your reputation as a broker who takes security seriously.
One thing that all brokers should also keep in mind is that even if they run a small business selling niche products such as motorhome insurance, if your website is hacked and your customers’ details are stolen you could be held liable. This is why so many companies, especially those that hold extremely sensitive data, are now investing in public liability cover that includes cyber insurance.
In the future even more brokers will be moving online, which is why you should start thinking about keeping your customers’ and your business safe today. Remember, it’s always better to be safe than sorry and your customers will ultimately hold you responsible should you lose their personal information.
<span style=”font-size: xx-small;”><a href=”https://pixabay.com/en/security-protection-anti-virus-265130/” target=”_blank” rel=”nofollow”>Photo</a> by Pixabay</span>