BIBA’s response to Money Advice Service consultation
6th June 2012
1.1 The British Insurance Brokers’ Association (BIBA) welcomes the opportunity to respond to the Treasury Select Committee inquiry into the Money Advice Service.
1.2 BIBA is the UK’s leading general insurance organisation representing the interests of insurance brokers, intermediaries and their customers. BIBA membership comprises of just over 2000 regulated firms having merged with the Institute of Insurance Brokers (IIB) in November 2011.
1.3 Our sector sells 80% of general insurance commercial business in the UK and 56% of all general insurance – including home, motor, travel, commercial and industrial policies. General Insurance brokers help businesses and individuals get access to insurance products best suited to their needs and budget – in the current economic circumstances, their services are more vital than ever.
1.4 We understand that the Treasury Select Committee are considering the role of the Money Advice Service and this submission focuses in particular on the questions of specific relevance as set out in the terms of reference.
1.5 We welcome the objectives of the Money Advice Service and the work that they do in these areas. As an organisation whose members are regulated by the FSA and pay fees to help fund the running of the Service. We are therefore very concerned to ensure value for money for businesses, individual consumers and our members.
1.6 BIBA believe that we have a number of solutions to financial services problems which would allow us to help support the Money Advice Service in achieving its aims. We would welcome the opportunity to work with them more closely.
1.7 At the current time, engagement with the Money Advice Service is on a largely ad hoc basis, and given the ways in which we think we could help the Money Advice Service better deliver on its objectives, we would like for there to be more consistent engagement with external organisations.
1.8 The key areas where we believe the Money Advice Service could benefit from a relationship with BIBA are around underinsurance, suitable insurance, and signposting. More detail on all of these is set out below. We do, however, have a more general concern about the Money Advice Service’s use of the word ‘advice’ in their name. Formally, the Money Advice Service does not offer advice – and its usage could potentially give rise to unhelpful confusion between their role and that of IFAs or brokers. Alternatives which would offer much more clarity about its role and remit could be the Money Guidance Service or the Financial Education Service.
2. ENGAGEMENT WITH MONEY ADVICE SERVICE
2.1 BIBA understand that the Money Advice Service has two core statutory objectives
1. to enhance the understanding and knowledge of members of the public of financial matters (including the UK financial system), and
2. to enhance the ability of members of the public to manage their own financial affairs
2.2 We welcome the work of the Money Advice Service but believe that there could be more opportunities for BIBA to work more closely with the organisation to achieve its objectives.
2.3 Thus far, our engagement with the Money Advice Service has been inconsistent, with multiple changes of personnel causing difficulties establishing a consistent, stable, and mutually beneficial relationship. This has resulted in a rather ad hoc approach from MAS, with them only making contact when they have an immediate need which they think we could fulfil – and then, requesting a very swift response, BIBA strongly believes that a more strategic approach would be much more mutually beneficial, allowing us better to meet MAS’s needs, and helping us to get a better understanding of the areas in which we might work together.
2.4 Having said this, we welcome the importance placed on enhancing understanding for consumers and we think that there is an opportunity here for BIBA to work with the Money Advice Service to further help consumers understanding of the financial implications around insurance.
2.5 Below we detail some of the ways in which work currently undertaken by BIBA could help to support the objectives of the Money Advice Service. We believe that the solutions provided by BIBA would further help the Money Advice Service provide the best possible service to consumers.
3.1 Due to the difficult economic climate currently, many consumers have been cutting back on their insurance cover. Consequently, 57% of brokers have seen reductions in levels of insurance protection for personal lines customers. Without adequate insurance, consumers are at risk of not being fully protected in the event of a claim. BIBA have been working to raise awareness of the consequences of not having suitable insurance, and are looking to help businesses so that they are protected in event of a claim.
3.2 We would welcome the opportunity to work with the Money Advice Service to develop financial education tools highlighting the importance of having adequate insurance. This links to the Money Advice Service’s objective around helping individuals to manage their own financial affairs. Through education, BIBA can help to show individuals what benefit having the right insurance could have.
4. Suitable Insurance
4.1 In these difficult economic times, consumers are also cutting back on insurance as they prioritise other areas for spending. Commoditisation of the insurance market has also led to an unhealthy focus on price and deterioration in the amount of advice ought by customers to obtain suitable cover.
4.2 Insurance policies are complex contracts and without advice, there can be gaps in protection, which will result in consumers not being able to make a claim. BIBA members can provide the necessary advice to ensure that consumers are suitably protected.
4.3 BIBA members also help consumers who have difficulty in finding insurance cover, such as complex motor insurance or travel insurance for the elderly. Our specialist members can help to find suitable insurance that meets consumer needs.
4.4 BIBA is currently working with government departments, regulators and consumer bodies regarding access to and the benefits of insurance advice, and the promotion of the value of suitable insurance protection. We believe that there is the opportunity here for BIBA to work with the Money Advice Service to provide financial education to individuals.
5.1 In difficult economic times, the demand for the services offered by BIBA’s members is greater than ever. BIBA’s members play an important role in helping to ensure that individuals get access to the insurance most suitable to their needs and budget – thereby helping to keep the cost of living as manageable as possible.
5.2 BIBA provides a unique solution to accessing independent advice on insurance protection. In the past year, the BIBA Find A Broker service has received around 400,000 enquiries from people looking to find suitable insurance because of their particular circumstances, and has helped to find insurance brokers offering appropriate cover.
5.3 We have been working with the government to promote signposting, however, we would appreciate a much wider use of signposting to help protect the lives and livelihoods of more consumers in the UK. We would welcome the opportunity to work more closely with the Money Advice Service to help consumers understand that insurance at a suitable price is available.
5.4 BIBA members pride themselves on being able to find insurance for those who are struggling to and through signposting to the Find A Broker service, the Money Advice Service would be helping consumers to better understand issues around managing their financial affairs.
6.1 We believe that BIBA offers potential solutions to help consumers use their money in the most effective way to gain suitable insurance cover. We welcome the objectives of the Money Advice Service and would be delighted with any opportunity to work more closely with the Money Advice Service to help them achieve their statutory objectives.
We hope you find our response helpful. If you would like to meet to discuss this in further detail, please do not hesitate to contact me.
Graeme Trudgill FCII
Head of Corporate Affairs
0207 397 0218