FSA Regulation
Regulatory Risk Position
The FSA Conduct of Business rules states that each retail customer must be given the following documents
- Status Disclosure - details the service that the intermediary will give to the customer, including whether they will be offered insurance products from one insurer, a panel, or from the whole market
- Demands & Needs Statement - that explains the customer's insurance demands and needs and how the intermediary has met those needs. Where an intermediary has 'advised' the customer they will also need to state the basis for the advice given and will also need to provide this to commercial customers
The basis of advice that an intermediary gives is that the product must be 'suitable' for the customer's needs. This is a different requirement form the Life industry, where the duty is 'Best Advice'. In the Life industry if an intermediary knows a better product is available in the market, then they are obliged to suggest that alternative, even if they are unable to provide that product.
For General Insurance, there may be a better-fit product available in the market, but if this is not available, or the intermediary has decided not to place business through that route, then it is acceptable to place the business with the most suitable product they have, provided this meets the customer's demands and needs. If any of the customer's demands and needs are not met by the product, these gaps must be made clear to the customer.
The FSA rules have also changed the intermediary's' burden of responsibility. Typically pre-FSA the intermediary acted as an agent of the insurer and an agent of the customer at different points in a transaction. The balance is now firmly tipped to ensure that the intermediary acts principally in the interests of their customers.
