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The Life Insurance Market
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Deadlines being what they are, I must write this before the FSA publishes its final ICOB rules. So I believe, rather than know, that they will require stronger safeguards so that those who buy over the phone are clear as whether they are getting advice or not; and will also require all those who sell without advice to make clear to that what that actually means is that the customer is responsible for the product bought being suitable, not the seller.
What’s more I believe they will be asked to do this in an ‘outcomes-focused’ way. That must mean a way that gets the consumer to realise that they really should be certain of what they really want before they buy. The FSA is rightly concerned that the quick and easy financial services product purchase decision has a horrible habit of turning out to be the wrong one, so making consumers think twice and thus get it more right is a laudable regulatory aim.
But there will be two likely consequent seller reactions that need simply to be enforced out if the ICOB rules are not to make a mockery of. The first is that non advisers will migrate to web only sales (a fast growing non advised area already) in order to more easily get away with things. The second is that whichever way they sell, those scared of making the consumer think twice will make the warnings as meaningless as they are now. On the web they will perhaps rely on a huge ‘tick to acknowledge you accept our terms’ pop up that no-one ever reads; over the phone it will be a monotone drawl read out once the decision is made in the consumers mind so that they switch off and just want to get on with it.
Bearing in mind these fears I was delighted to read Dan Waters, Director of Retail Policy and Themes at the FSA, quoted as saying: "For many people the internet is the channel of choice for shopping around for financial products. However, it can expose consumers to high risk as they are able to make instant purchases without advice. This is why it is so important that firms' websites are fair, clear and not misleading…… firms should take immediate steps to improve their websites. The FSA will be carrying out a further review in March 2008 and will take action if it finds further failings.” That sounds like planned enforcement to me, and it would be wonderful if it was a joined up approach governing ICOB sellers too. Let us hope the enforcers make this rule count!
Should web based sellers, or those providers whose products they sell, want to see a way I think consumers could be treated fairly in this area, they could have a look at the dummy website snippet http://www.lifesearch.co.uk/breakthrough and see an effective way of confronting consumers with the realities of their situation. Over the phone operators can easily develop a verbal version. The aim in all cases of course is to ask short clear questions to which the expected answer is not totally obvious. In a warning-crowded world, that is perhaps the best way of making warnings work.
Now that sort of outcomes-focused approach is, I suspect, the last thing non advisers will desire, so it will be as ever up to advisers draw the attention of Dan Waters and his team to those who flout or more likely subvert the rules with non outcomes-focused warnings, so that the rank bad practice that is most non advised selling today is sorted out.
This article has featured in MoneyMarketing, 2007
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