What New Insurance Regulations Mean for You
Buying an insurance policy should now be simpler than ever before. New rules that came in on 14 January 2005 passed the regulation of general insurance from the General Insurance Standards Council to the Financial Services Authority (FSA)http://www.fsa.gov.uk, a non-government agency set up in 1997 to maintain confidence in Britain’s financial system.
Insurance companies, brokers and financial advisers must now be more transparent about their services and products, to help avoid a rerun of the mis-selling fiasco of the 1990s, which had disastrous financial consequences for thousands of customers who were left with worthless investments.
Before a seller can offer you its services, it must be authorised by the FSA or be awaiting authorisation. To receive approval it must fulfil a number of requirements based on its professionalism and competence.
By the new law, insurance sellers must provide you with clear information on the service they provide, the products they are selling and which companies’ products they offer. An obligatory ‘key facts’ document with every policy will help you compare policies easily.
You now have the right to cancel any policy with 14 days of purchase, whereas previously you were able to cancel within a fortnight only if you could prove that you had been given misleading information when being sold the policy.
If you have a complaint, you are entitled to seek redress though the Financial Ombudsman Servicehttp://www.financial-ombudsman.org.uk, which will also deal with issues that arose before 14 January, when the new rules came into force, provided that the seller is now authorised by the FSA. You may also be entitled to compensation if a seller from whom you have bought insurance goes out of business – but only if it was fully authorised. Customers of firms awaiting approval are not entitled to such protection.
However, the new rules do not provide absolute customer cover. Consumer rights organisations such as Which?http://www.which.net claim that there are holes and inconsistencies in the regulations that could lead to mis-selling because policies for complex issues such as life insurance and payment protection will be treated in the same way simplistic way as more straightforward policies for car and house insurance.
There are also concerns over the fact that travel agents are not covered by the new regulations, meaning they can continue the widespread practice of building costly and ineffective travel insurance into the price of holiday packages. (For more details, see UK Net Guide’s article on travel insurance). Extended warranties on electrical goods also do not fall within the new regulations, meaning customers may still be taking out such cover unnecessarily.
It is still essential that you read a policy carefully before committing to buying. You should consider if you have been given enough choice and that the insurance you wish to buy is entirely appropriate and covers all your requirements.
The new laws could come at a price to customers. Even though the FSA has estimated that the new rules will cost each insurance seller an average of only £2.80 per policy, some within the industry have warned that the cost of increased regulation will mean that customers will end up paying extra, either through higher premiums or increased arrangement fees. However, other experts insist that the change in rules will stimulate greater competition in the marketplace, keeping prices low.
