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BRITISH INSURANCE BROKERS ’ ASSOCIATION

B. I. B. A. British Insurance Brokers’ Association. BRITISH INSURANCE BROKERS ’ ASSOCIATION. INSURANCE MEDIATION DIRECTIVE UK GOVERNMENT (TREASURY) - SETS SCOPE – MINIMUM REQUIREMENTS - ENACTS LEGISLATION FINANCIAL SERVICES AUTHORITY (FSA)

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BRITISH INSURANCE BROKERS ’ ASSOCIATION

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  1. B I B A British Insurance Brokers’ Association BRITISH INSURANCE BROKERS’ASSOCIATION

  2. INSURANCE MEDIATION DIRECTIVE UK GOVERNMENT (TREASURY) - SETS SCOPE – MINIMUM REQUIREMENTS - ENACTS LEGISLATION FINANCIAL SERVICES AUTHORITY (FSA) - AUTHORISE FIRMS AND INDIVIDUALS - SET RULES FOR CONDUCT - MONITOR COMPLIANCE AND ENFORCE

  3. WHO WILL BE REGULATED?INTERMEDIARIES, INCLUDES EMPLOYEES OF INSURERS FOR “RETAIL RISKS” APPOINTED REPRESENTATIVE REGIME TO APPLYDESIGNATED PROFESSIONAL BODY REGIME

  4. “PROPORTIONATE” REGULATION

  5. FSA OBJECTIVES. CONSUMER PROTECTION MARKET CONFIDENCE CONSUMER EDUCATION FINANCIAL CRIME

  6. FSA CONSULTATION PAPERS (C.P.’s) CP160/187 SELLING & ADMINISTRATION CLOSED 30/9 CP159/PS APPOINTED REPS (AR) “NEAR FINAL RULES” CP174/PS PRUDENTIAL REQUIREMENTS “NEAR FINAL RULES” CP180 FEES CLOSED 24/6 CP196 DISTANCE MARKETING DIRECTIVE SUPPLEMENTS INFORMATION IN CP187 CP197 REPORTING REQUIREMENTS CLOSES 11/12

  7. TIMETABLE APPLICATION PACK AVAILABLE FINAL QUARTER FINAL CONDUCT OF BUSINESS RULES DEC/JAN CP ANNUAL FEES/FOS DEC CP FSCS/FEEDBACK APPLN FEES(CP180) DEC APPLICATIONS “EARLY 2004” DISTANCE MARKETING DIRECTIVE OCT 2004 FSA REGULATION 14.01.05

  8. FSA CONSULTATION 160/187 CUSTOMER CLASSIFICATION - RETAIL - COMMERCIAL

  9. FSA CONSULTATION 160/187 CUSTOMER CLASSIFICATION - RETAIL - COMMERCIAL - STATUS DISCLOSURE - COMPLAINTS

  10. CP 160/187 FAIR TREATMENT OF CONSUMERS - COMMISSION DISCLOSURE (COMMERCIAL) - UNFAIR INDUCEMENTS - EXCESSIVE CHARGES (RETAIL) - CANCELLATION RIGHTS (RETAIL) 14 DAYS

  11. CP 160/187FAIR TREATMENT OF CONSUMERSCLAIMS HANDLING - FAIR AND PROMPTLY - PROMPT PAYMENT WHEN SETTLEMENT AGREED. - DISCLOSE ANY POTENTIAL CONFLICT OF INTEREST

  12. CP 160/187 STATUS DISCLOSURE RETAIL CUSTOMERS ( BEFORE CONCLUSION OFPOLICY OR INCURRING FEES) • a) STATUTORY STATUS & HOW TO CHECK FSA REGISTER • b) CAPITAL OR VOTING RIGHTS HELD IN OR BY OTHER INSURANCE UNDERTAKINGS (10%) • c) HOW TO COMPLAIN TO THE FIRM & AVAILABILITY OF FOS • d) ANY FEES FOR ADVICE ( AS OPPOSED TO PRODUCT RELATED CHARGES )

  13. CP160/187 PRODUCT DISCLOSURE GIVE RETAIL CLIENTS ON DURABLE MEDIUM PRE COVER FACE TO FACE DISTANCE YES DISTANCE NO (POST/NET) (‘ PHONE) POL SUMMARY * * x PRICE INFO * * x HOW TO CLAIM * POL DOCUM’T * x CAN BE ORAL BUT MUST GIVE ALL INFO IMMEDIATELY AFTERWARDS

  14. CP160/187 PRODUCT DISCLOSURE RETAIL CUSTOMERS - KEY INFO: BENEFITS/EXCLUSIONS UNBUNDLE PREMIUMS / ADVISE IF INSURANCE OPTIONAL? - POLICY SUMMARY / “SIGN POSTING” - RENEWALS MUST BE PROVIDED TO THE CUSTOMER ON “DURABLE MEDIUM” 21 DAYS BEFORE POLICY EXPIRES

  15. CP 159 APPOINTED REPRESENTATIVES (AR) “AR ACTS AS AGENT FOR AUTHORISED FIRMS WHICH ACCEPT CONTRACTUAL RESPONSIBLE (IN WRITING) FOR CERTAIN ACTIVITIES”

  16. CP 159 • AN AR IS EXEMPT FROM AUTHORISATION • REGISTER FOR AR • CANNOT BE EXEMPT AND AUTHORISED

  17. CP 159 • SINGLE/MULTI PRINCIPAL REGIME • INTER PRINCIPAL AGREEMENTS • COMPLAINTS TO SINGLE PRINCIPAL

  18. CP 159AR ACTIVITIES - CAN INTRODUCE, ARRANGE, ADVISE, CONCLUDE - MONEY RESTRICTIONS - PRINCIPAL LIABLE FOR AR ACTIVITIES

  19. CP 159AR ACTIVITIESMONEY RESTRICTIONS • 3 DAY RULE REMAINS AS OPTION • PRINCIPAL MUST :- • a) CHECK MONIES HELD BY AR IN SEGREGATED CLIENT A/C TO SATISFY ESTIMATES ARE MET • b) VERIFY & RECONCILE MONIES • c) MAINTAIN EQUIVALENT MONIES AS HELD BY AR IN THEIR TRUST A/C

  20. CP 159AR ACTIVITIES - NETWORKS • FSA WILL PAY ATTENTION TO SYSTEM & CONTROL OF NETWORKS • DEFINITION :- • GROUP OF 5 OR MORE ARs • GROUP OF LESS THAN 5 ARs WITH 26 OR MORE REPS

  21. CP 159AR ACTIVITIES INTRODUCER AR LEAFLETS ONLY EXEMPT

  22. CP 174/PSPRUDENTIAL AND OTHER REQUIREMENTS • PERIMETER GUIDANCE • HIGH LEVEL STANDARDS SYSTEMS AND CONTROLS. • FINANCIAL RESOURCE • COMPENSATION • LLOYDS

  23. CP 174/PSINTERMEDIARIES FINANCIAL RESOURCE SECURITY COMPENSATION SCHEME P.I. SEGREGATED A/C CAPITAL

  24. CP 174/PSPROFESSIONAL INDEMNITY - LIMITS e1M ANY ONE CLAIM e1.5m AGGREGATE OR - 10% ANNUAL INCOME WITH UPPER LIMIT £30M - LARGER EXCESS ALLOWABLE IF CAPITAL HELD ABOVE MINIMUM

  25. CP 174/PS CLIENT MONIESSEGREGATED ACCOUNTS - COMPULSORY, UNLESS RISK TRANSFERRED

  26. CP 174/PSSEGREGATED ACCOUNTS • STATUTORY TRUST • AUDIT NOT REQUIRED IF AGGREGATE AMOUNT IN THE ACCOUNT DOES NOT EXCEED £30,000

  27. CP 174/PSSEGREGATED ACCOUNTS -NON STATUTORY TRUST - ALLOWS CREDIT FROM CLIENT A/C, CLAIMS & REFUNDS USING CONSENTING CLIENT MONEY - MINIMUM CAPITAL REQUIREMENT £50,000 IF RETAIL MONIES USED - AUDIT REQUIRED

  28. SEGREGATED ACCOUNTS SEGREGATED ACCOUNTS MAY BE OPERATED SIDE BY SIDE MAY ADOPT CLIENT MONEY SEGREGATION OR RISK TRANSFER FOR DIFFERENT TRANSACTIONS WITH SAME CLIENT RISK TRANSFER MONIES NOT TO BE HELD IN TRUST ACCOUNT ACCRUAL BASIS OF RECONCILIATION ACCEPTABLE TOBA FOR CLIENT ACCEPTED FOR NOTIFICATION, CONSENT OR AGREEMENT IN WRITING INVESTMENT TO FOLLOW GISC ( PERMISSION TO ACT AS INVESTMENT MGR IN CERTAIN CIRCUMSTANCES ?)

  29. SEGREGATED ACCOUNTS COMMISSION WITHDRAWAL TO BE TAKEN ON A “RECEIVED” BASIS INTEREST IF THE AMOUNT OF INTEREST IS NO MORE THAN £20 FOR A TRANSACTION CLIENT CONSENT TO RETAIN THE INTEREST IS NOT NECESSARY.

  30. CP174/PSCAPITAL NOT HOLDING CLIENT MONEY HIGHER OF £5000 OR 2.5% OF ANNUAL INCOME HOLDING CLIENT MONEY HIGHER OF £10000 OR 5% OF ANNUAL INCOME ( NON STATUTORY TRUST MIN £50000 IF RETAIL MONIES INVOLVED ) GOODWILL ALLOWABLE AS CAPITAL RESOURCE UNTIL JAN 08

  31. CP174/PS COMPENSATION EXTENDING FSCS WITH SUB-SCHEME FOR MEDIATION ( CP IN DEC ) COMPENSATION TO FOLLOW EXISTING SCHEME -- 100% FOR COMPULSORY CLASSES -- OTHER CLASSES - 100% < £2000 - 90% > £2000 INCLUDES “SMALL” COMMERCIAL < £1M T/O

  32. CP 174/PSAPPROVED PERSONS • NUMBERS LINKED TO EXECUTIVE BOARD • SMALLER FIRMS ANTICIPATED ONE PERSON WILL MEET CRITERIA

  33. CP 180 APPLICATION FEES • < 31/5 > 31/5 • INCOME e - mail paper e-mail paper • 0 - 1m 500 600 1,100 1,200 • 1 - 3m 4,000 4,250 5,500 5,750 • 1 - 25m 8,750 8,750 10,750 11,000 • >25 m 22,500 23,000 24,500 25,000 • CP 180FINANCIAL SERVICES COMPENSATION SCHEME • - COMPENSATION FUND LEVY • “Pay as you go” • - MANAGEMENT EXPENSES LEVY • Consultation rules & funding in CP Jan 04

  34. CP180 FINANCIAL OMBUDSMAN • -GENERAL LEVY • - CASE FEE

  35. CP180 FINANCIAL OMBUDSMAN • -GENERAL LEVY • - ( IFA 2003/4 £20 per Approved Person • Subject to Minimum £75 per firm ) • - CASE FEE • - £360 per case or £600 per “special” case

  36. CP197 REPORTING REQUIREMENTS EVERY 6 MONTHS ( FINANCIALS EVERY 3 MONTHS FIRMS > £5M INCOME ) Changes to standing data (eg name of firm ) Compliance with key criteria (threshold conditions) Training & competence Conduct of business (source of business) Product sales not reported by provider Complaints

  37. CP197 REPORTING REQUIREMENTS FINANCIAL BALANCE SHEET PROFIT & LOSS COMMISSION DATA REGULATORY CAPITAL CLIENT MONEY PROFESSIONAL INDEMNITY COVER

  38. EXTERNAL COSTS • APPLICATION FEE • PERIODIC FEES • FINANCIAL SERVICES COMPENSATION • FINANCIAL OMBUDSMAN SERVICE

  39. BROKER COSTS • PROFESSIONAL INDEMNITY INSCE • CAPITAL REQUIREMENTS • TRAINING & COMPETENCE • SYSTEMS ( ? I/T, RECORD KEEPING )

  40. BROKER BENEFITS • LEVEL PLAYING FIELD • LESS COMPETITION FOR BROKER SECTOR • MORE ROBUST BUSINESSES • MORE VIBRANT BROKER SECTOR • MORE PROFESSIONAL

  41. NEXT STEPS • BE PREPARED - DON’T BE SCARED • BUSINESS & COMPLIANCE PLAN • GAP ANALYSIS & PROJECT PLAN • BE AWARE - HAVE YOUR SAY • GET ON WITH IT !!

  42. B I B A British Insurance Brokers’ Association BRITISH INSURANCE BROKERS’ASSOCIATION

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