Consultations – British Insurance Brokers' Association https://www.biba.org.uk The British Insurance Brokers' Association is the UK's leading general insurance intermediary organisation Tue, 18 Sep 2018 09:17:38 +0000 en-US hourly 1 https://wordpress.org/?v=4.9.6 BIBA views on Brexit and the Government’s White Paper https://www.biba.org.uk/consultations/biba-brexit-white-paper/ Fri, 27 Jul 2018 13:54:33 +0000 https://www.biba.org.uk/?p=30563 This Paper  on Brexit offers no new solutions and in fact falls short of what is needed for our services-orientated nation.  BIBA is therefore reiterating

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This Paper  on Brexit offers no new solutions and in fact falls short of what is needed for our services-orientated nation.  BIBA is therefore reiterating to members that UK based insurance brokers insuring an EU based customer with a UK insurer will need to establish the UK insurer’s Brexit plans.

 ACCESS

 Services represent 80% of the UK economy and there are 2,775 UK insurance brokers with passports to trade in the EU.  This is more than any other sector and accounts for around £8 billion of business. Therefore it is of huge concern that the Paper makes it clear that the UK can no longer operate under the EU’s passporting regime. Despite the obvious political challenges in reaching this, a mutual market access solution, in our view, would still be the best way forward.

Passporting into the UK is an issue for EU insurance brokers as well as insurers. EU brokers bring business to the UK when using UK-based wholesale insurance brokers to place business into the Lloyd’s market, for example. UK brokers use EU insurers as capacity, often on some of the more difficult to place risks, which limits the exposure of the UK market by spreading the risk more widely across Europe.

Members have also flagged that passported capacity is often required in the areas of:

  1. Insurance backed guarantees
  2. Product failure type risks and also protected cell / self-insured arrangements which typically cover short tail, smaller, liability risks
  3. Latent defects
  4. Building warranty.  Warranty type Insurance is also often purely from passported markets e.g. to cover damp proofing products they sell to contractors who installed on site
  5. A very specialist market where passported capacity is required includes medical malpractice for facial aesthetics clinicians operating in clinics in Switzerland, Spain and France
  6. Some legal indemnity markets (principally affecting Zurich Insurance)
  7. Distressed classes such as empty buildings, nightclubs and very soon cladding contractors PII
  8. Solicitors professional indemnity insurance
  9. Taxis in certain inner city areas

These are all markets where there is a limited number of carriers and where passported capacity plays a significant role in generating competition between an otherwise sparse number of insurers.

We are uncertain about the genuine benefit for our sector of the new “economic and regulatory arrangement” mentioned in the Paper. This requires further explanation.

Why is the UK Government not seeking a bold new agreement/treaty that will still effectively allow tariff free access/authorisation for the 2,775 UK Brokers who currently have passports to continue to trade in the EU?

The issue goes beyond the brokers who passport into the EU. Many UK brokers serve businesses that reside in the EU or have assets in the EU covered by policies issued and serviced from the UK. The lack of continued passporting or similar solution, such as mutual recognition, will result in fragmented and potentially inferior, more expensive insurance protection for EU and UK customers. How will UK insurance brokers be able to continue to service the 38 million EU customers after Brexit? It is still unclear from the White Paper, or follow-up conversations with Government departments.

As things stand, there seems to be only two ways forward, both at additional cost.  First, the BIBA/WBN (Worldwide Broker Network) solution (putting UK brokers in touch with an EU broker where their customers reside) or second, firms may have to go to the trouble and considerable cost of setting up a separately capitalised entity with regulatory approval in the EU.  Both of these options will adversely affect the UK’s competitiveness.

TEMPORARY PERMISSIONS REGIME

 BIBA welcomes the UK Government’s and UK regulators’ plans for a temporary permissions regime for inbound passporting EEA firms to continue to access the UK market and so honour commitments to their UK clients.

Full details can be found here

EQUIVALENCE

 The White Paper proposes an ‘expanded equivalence’ regime, but the Insurance Distribution Directive (IDD) makes no provision for equivalence.  BIBA would welcome urgent clarification on how the Government sees this working for our sector.

Existing equivalence is cancellable with a totally inadequate 30 days’ notice.  This is unsuitable given that insurance contracts are usually annual or multi-annual policies. As the White Paper proposes a structured withdrawal process around equivalency decisions, BIBA urges the Government to be alive to the annual and sometimes even longer durations of insurance contracts when agreeing what notice period(s) the UK Government may accept as appropriate.

A structured withdrawal process would mean that the EU would still have autonomy to decide if equivalence was no longer achieved, whilst allowing that trading partner a reasonable and fair time period within which to adjust to the new position.

TRANSITION PERIOD

 The White Paper includes within it a title ‘there might be transition period’.  This uncertainty leaves millions of customers, who will have policies that straddle the exit date or may need to be called upon after EU exit, in limbo. For the sake of certainty, we believe that rather than an extension of the transition period, that ideally an extension to the Article 50 deadline would be the best solution, because no deal would be disastrous for clients, the economy and UK firms.  This would be helpful until we can agree on a series of solutions that the UK Government, Europe itself and UK businesses feel is a sensible way forward. BIBA is concerned that in the event of ‘no deal’ there is therefore no transition period.

EHIC

 BIBA welcomes the proposal on page 34 to continue the European Health Insurance Card.

NORTHERN IRELAND

 BIBA agrees with the sentiment that there must be no hard border between Northern Ireland and the Republic of Ireland or Northern Ireland and mainland Great Britain.

 WHO IS SAYING WHAT?

 The European Commission paper of 19 July 2018 ‘Preparing for the withdrawal of the United Kingdom from the European Unionhttp://europa.eu/rapid/press-release_IP-18-4545_en.htm gives no comfort on insurance contract continuity.

 The FCA gave a speech on 19 July 2018 regarding Brexit preparedness which members can access here https://www.fca.org.uk/news/speeches/fca-approach-brexit-our-preparations-and-our-vision-future

Members are also encouraged the see the three EIOPA opinions of 11/07/17, 21/12/17 and 21/06/18:

 

 

White Paper

Government’s White Paper can be accessed here 

 

 

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BIBA’s final submission to the European Commission on the Refit of the Motor Insurance Directive. https://www.biba.org.uk/consultations/bibas-final-submission-to-the-european-commission-on-the-refit-of-the-motor-insurance-directive/ Thu, 26 Jul 2018 08:30:55 +0000 https://www.biba.org.uk/?p=30553 Article 1 – Scope of the directive (VNUK) The EC is proposing  to clarify  vehicle use by including a the definition of “use of a

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Article 1 – Scope of the directive (VNUK)

The EC is proposing  to clarify  vehicle use by including a the definition of “use of a vehicle” in order to incorporate the judgements of the Court of Justice of the European Union in the cases of  Vnuk, Rodrigues de Andrade  and Torreiro. The proposal is to change the use of a vehicle in the Directive to “use of a vehicle means any use of such vehicle, intended normally to serve as a means of transport, that is consistent with the normal function of that vehicle, irrespective of the vehicles characteristics and irrespective of the terrain on which the motor vehicle is used and of whether it is stationary or in motion”.  While the EC has indicated that the proposal clarifies the concept of use and where compulsory insurance therefore applies, BIBA still has concerns over the application of this definition which we believe still lacks clarity.

After analysing the impact assessment it is clear to us that the majority of member states do not currently require compulsory insurance for use of a vehicle on private land and therefore the REFIT should reflect the practices and wishes of member states rather than simply accept rulings from the CJEU which have serious ramifications and are not reflective of the wishes of member states.

It would appear that the UK Government has provided actuarial evidence on the cost of motorsport insurance being an additional £229 million per year.  These figures can only be considered hypothetical as the experience of BIBA members is that no insurer would provide a directive compliant Motor Third Party Liability (MTPL) policy for competitor to competitor motorsport, due to the frequency and severity of claims making this risk uninsurable in the UK market as well as the majority of EU markets.

We disagree with the impact assessment statement on the impact of motorsports in Finland following their introduction of compulsory MTPL policy for motorsports, because we understand that within three months of the requirement being introduced, insurance premiums have increased twenty-fold to unaffordable levels for EU citizens and it is inherent on the EC to investigate this before imposing compulsory MTPL for motorsports.  BIBA further understands that Finnish legislation states that no third-party insurance is compulsory when vehicles are driving in an ‘enclosed’ area. So again, their current legislation does NOT comply with the interpretation of the Directive given in the VNUK judgement and the EC’s assertion in the Impact Assessment that ‘..countries such as Finland which already require MTPL insurance in line with the Directive….’ (page 156) is, in fact, incorrect.

We are also concerned that there is no definition of ‘transport’ within the draft directive which will create uncertainty and increase cost, because clarification will only be provided when legal cases are dealt with by the CJEU on this issue. For example, different definitions of transport may include:

take or carry (people or goods) from one place to another by means of a vehicle, aircraft, or ship.

– a system or means of conveying people or goods from place to place.

BIBA would contend that vehicles not designed for transport, like lawnmowers and motor racing vehicles on a circuit, are out of scope and it would be helpful if this could be specified in the Directive.

For the avoidance of doubt, BIBA’s view is that motorsport should be explicitly excluded.

The widening of the definition of a vehicle, and confirmation that MTPL insurance will apply to private land, will bring into scope ‘vehicles’ such as ride-on-lawnmowers, fairground rides, agricultural vehicles, museum vehicles, children’s toys, golf buggies, and fork lift trucks being operated in commercial properties. These should be excluded from the requirement to arrange MTPL insurance.  For example ‘lawn-mowing’ is defined as ‘to cut down (grass) with a machine’. In no way does it refer to the transport of people or goods therefore should be excluded from the Directive.

One other special category that should be excluded from the Directive is mobility scooters. These are vital for the lifestyle of older and vulnerable citizens who will not understand registration and insurance requirements, and would be subject to paying a new premium or risk breaking the law and being convicted.  Their only other alternative is to give up their mobility.

There is also the impossible burden of enforcement of the requirement for compulsory MTPL insurance for these vehicles and also fraud, for example fake injuries involving an unregistered lawnmower on private land.

If the Motor Insurance Directive is not amended to remedy the situation there could be huge and costly issues that the UK will have to consider:

Registration – the UK Government may have to create a register of newly in-scope vehicles – forklift trucks, agricultural machinery, construction machinery, ride-on lawnmowers, mobility scooters etc.

Licensing – there would be a need to licence the users of newly in-scope vehicles.

Type approval – as many of the newly in-scope vehicles are not designed to travel on roads they will not comply with the European Community Whole Vehicle Type Approval (ECWVTA), which applies to vehicles capable of more than 4mph or the Motorcycle Single Vehicle Approval (MSVA) scheme.

Following the concerns mentioned in this document with fraud, uninsured driving and motorsport we strongly propose to the EC that rather than change the definition of use of a vehicle, instead the EC revert to the earlier solution suggested in their roadmap regarding definition on a vehicle. BIBA believe that this will overcome the problems raised and therefore suggest the following:

‘use of a vehicle’ means any use of such vehicle, intended normally and at the time of the accident to be used in traffic, that is consistent with the normal function of the vehicle, irrespective of whether it is stationary or in motion and all motorsport is specifically excluded.

Article 4 – Checks on Insurance

BIBA welcomes the proposal from the EC that will  allow, without interfering with free-movement,  checks on the validity of insurance especially if they are driven by technology, are  non-discriminatory, not aimed exclusively at insurance verification and do not require the vehicle to stop.

BIBA does share the concerns of the Association of British Insurers (ABI) that there is a discrepancy in the EC’s desire to tackle uninsured driving whilst at the same time extending the scope of the Directive to include many new types of vehicle, as well as the new requirement for compulsory MTPL insurance on private land, which will lead to a sudden and substantial increase of uninsured vehicles, due to the difficulties with enforcement and ensuring mass compliance of millions of vehicles that many Governments pre-ruling felt were not required to have compulsory MTPL insurance.

Article 9 – Minimum amounts of cover

BIBA supports the harmonisation proposal that there should be equal minimum levels of protection across the EU member states, to ensure that there is a sufficient level of minimum protection across the EU for the innocent parties to motor vehicle accidents in relation to personal injury compensation and damage to property irrespective of the type of vehicle.

Article 10a – Insolvency of an insurer

BIBA is satisfied with the EC’s proposal in relation to compensation arrangements ultimately being the responsibility of the home member state of the insurer concerned.  The Financial Services Compensation Scheme already fulfils this function in the UK.

BIBA is concerned in relation to paragraph 10A 1. (c). This question was not considered as part of the EC’s public consultation.  It is unclear whether this applies just to an insolvent undertaking as we believe the intention must be. We do not believe it should apply to a solvent insurance undertaking.  In the UK market the Financial Conduct Authority (FCA) rulebook lays down rules that insurers are required to comply with, including the requirements to:

  • handle claims promptly and fairly;
  • not unreasonably reject a claim (including by terminating or avoiding a policy); and
  • settle claims promptly once settlement terms are agreed.

Therefore the Directive should be clear that this only applies to an insolvent insurer.

Article 16 – Claims history statements

BIBA welcomes the equality of treatment of claims history statements across differing member states but expresses caution in the detail of how these might be required to operate.  BIBA believes that any prescriptive requirement for uniformity will create an administrative burden, significant IT system changes and add cost into a system which already works well in the UK and is ultimately paid for by the premiums paid by customers.

We would be very keen to discuss this response with Commission officials and hope you find our response helpful.

If you would like to discuss further please contact:

Graeme Trudgill – trudgillg@biba.org.uk

Martin Bridges – bridgesm@biba.org.uk

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BIBA response to BEIS Green Paper on Modernising Consumer Markets https://www.biba.org.uk/consultations/biba-response-to-beis-green-paper-on-modernising-consumer-markets/ Mon, 09 Jul 2018 11:29:08 +0000 https://www.biba.org.uk/?p=30423 About BIBA The British Insurance Brokers’ Association (BIBA) is the UK’s leading general insurance intermediary organisation representing the interests of insurance brokers, intermediaries and their

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About BIBA

The British Insurance Brokers’ Association (BIBA) is the UK’s leading general insurance intermediary organisation representing the interests of insurance brokers, intermediaries and their customers.

BIBA membership includes just under 2,000 regulated firms, employing more than 100,000 staff. General insurance brokers contribute 1% of GDP to the UK economy; they arrange 72% of all general insurance with a premium totalling £62.7bn and 93% of all commercial insurance business. Insurance brokers put their customers’ interests first, providing advice, access to suitable insurance protection and risk management.

BIBA helps more than 550,000 people a year to access insurance protection through its Find a Broker service, both online and via the telephone.

BIBA is the voice of the sector advising members, the regulators, consumer bodies and other stakeholders on key insurance issues.

It is worthy of note that under Agency Law, brokers most often act as agent of the customer, and our view represents the role our members play in this area.

Our response

We welcome the opportunity to respond to this consultation and are available to help provide any further insight/support to BEIS on this piece of work.

1. In which regulated markets does consumer data portability have the most potential to improve consumer outcomes, and for what reasons?

BIBA believes that data portability has most benefit where products are simple and readily comparable. These include markets such as utilities where the quality of electricity/water/gas does not vary; only the tariff that customer is on.

With regards to insurance, there are many different factors that go in to the rating used to determine the premium. Further, many policies offer differing levels of coverage, limits and excess. As a result, comparison on price alone can often result in a ‘hollowing out’ of coverage and limits in order to compete on premium. This is a phenomenon seen by both the industry as well as Defaqto; the ratings company that independently analyses thousands of products. They found that in the period of proliferation of price comparison websites, the number of five star policies decreased and the number of four star policies increased – as cover was stripped out of them.

An unhealthy focus on price, rather than quality of product, also leads to loss-leading, where introductory discounts are offered to customers in year one, and the premium subsequently increases in years two and three. Price comparison websites (PCWs) encourage churn, which in-turn, encourages loss-leading to attract new customers.

BIBA and the Association of British Insurers (ABI) recently announced joint guiding principles and action points to help tackle excessive premium differences between long standing and new customers. Key commitments include:

• ABI and BIBA members do not support excessive differences between new customer premiums and subsequent renewal premiums that unfairly penalise long-standing customers.
• ABI and BIBA members will take action so that customers’ tendency to shop around at renewal is not used to lead to excessive pricing differences that unfairly penalise long-standing customers.
• The ethos and approach to better outcomes for long-standing customers will be given Board or senior management level priority and formally incorporated into firms’ procedures for determining the premium at renewal.
• ABI and BIBA members should make clear in written, online or verbal customer communications that the new customer premium only applies for that year and subsequent renewal premiums may be higher.
• ABI and BIBA members who impact the final premium paid by customers should review their pricing approach for customers who have been with them longer than five years and assess whether this approach delivers a fair outcome.
• The ABI and BIBA will publish a report in no more than two years’ time that demonstrates how ABI and BIBA members have sought to tackle excessive differences between new customer premiums and subsequent renewal premiums that unfairly penalise long-standing customers.

Another issue with PCWs is the excessive cost they add to the transaction. Insurance providers who trade via PCWs are required to sign contracts containing ‘most favoured nation clauses which prohibit the provider offering that same product on their own website for less than that listed on the PCW. This inhibits any competition that brokers may offer and acts in favour of PCWs.

Given that the cost-per-acquisition for typical motor insurance policy can be around £50-60; this is a significant cost which the insurance provider is not able to strip out if they sold the policy through their own website. In our evidence to the CMA, we have pointed out that there is no competitive market pressure between PCWs to reduce their cost-per-acquisition fees. This lack of B2B competition results in the fees being kept continually high and the customer ultimately pays for this. Further, one large brand-named insurance intermediary recently had to close with the loss of many jobs because of the reliance of the personal lines market on business from PCWs. When the PCW increased their cost-per-acquisition fees, the business model was no-longer feasible and it was forced to close.

In summary, we are not confident that greater data portability will result in better consumer outcomes in the insurance market.

More concern around commoditisation of insurance, hollowing out and the role of PCWs can be found in our response to the CMA consultation on this matter: https://assets.publishing.service.gov.uk/media/59525f2bed915d0baa000073/british-insurance-brokers-association-dct-update-paper-response.pdf

2. How can we ensure that the vulnerable and disengaged benefit from data portability?

We have chosen to answer question 2 in-part with our answer to question 1.

Additionally, BIBA and the ABI have also launched a code of good practice to help vulnerable customers. This has been well-received by the industry and many firms have taken this up. The Code is designed to help insurers and insurance brokers recognise and help potentially vulnerable customers, who may need extra support when renewing motor and home insurance policies.

The Code is part of the industry’s ongoing work to improve consumer outcomes and to help all customers make the most of competitive motor and home insurance markets at renewal.

Under the Code participating insurers and brokers will:

• Ensure staff are adequately trained to recognise and understand potentially vulnerable customers at renewal and be able to offer flexible options to help address needs (where necessary).
• Periodically review legacy policies to, where possible, identify vulnerable customers to ensure they are aware of any more suitable alternative products now available.
• Ask potentially vulnerable customers at renewal if their current policy and renewal terms meet their needs, and make clear the importance of reviewing their cover.
• Consider if additional communication, for example a telephone call, is needed to help vulnerable customers through the renewal process.
• Ensure that the customer’s options, and how they can exercise them, are always clearly set out.

3. How can we ensure these new services develop in a way which encourages new entrants rather than advantaging incumbent suppliers?

Many start-up firms are able to access schemes aimed at helping to remove the risk from investing in early-stage companies. Two schemes in particular; the Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme (EIS) list insurance as an excluded activity from the scheme, meaning that investors in start-up insurance brokers are not able to benefit from the tax relief. This results in a difficulty attracting investment during the early stage (Seed and Series A) and firms often find it difficult to get to the break-even stage before the investment runs out.

There is a discrepancy with the scheme that if a tech company who offers solutions solely to the insurance market, but does not actually sell insurance were to apply, this would not fall under an excluded activity. This effectively discriminates against firms who want to develop their own tech as start-up brokers and forces firms to buy in the tech separately. This acts as a significant barrier to new entrants. A change in the rules regarding SEIS and EIS would help more entrants develop to fully-fledged business and bring new competition in to the market.

BIBA has been speaking to BEIS and HM Treasury about our plans to start an InsurTech ‘cluster’ – to help provide support to start-up InsurTech firms in areas such as regulation, access to insurance capacity, investment and mentoring. This should help with areas that start-up InsurTech firms find difficult and will increase their chances of being able to fulfil their potential.

Another barrier to entry in the insurance market is the excessively high cost-per-acquisition fees charged by PCWs. Given the significant cost and issue of loss-leading in order to compete, those with existing books of business have a commercial advantage compared to new entrants to the personal lines market.

4. What is the best way to publish performance data so that it incentivises firms to improve and can be used by consumers when taking decisions? Should firms also offer discounts or compensation for poor performance?

Insurance is a highly competitive market and the majority of insurance buyers already shop around.

The Financial Conduct Authority already collect much data on outcomes and we feel this area is sufficiently catered for in the insurance sector. Where a customer has a complaint, for example – about poor performance, there is an independent ombudsman for financial services who is able to make binding decisions on complaints at no cost to the policyholder.

The Financial Ombudsman Service (FOS) also produce frequent public reports detailing areas of complaint broken down by type of firm, as well as case studies of where service has been poor so that lessons can be learned by all concerned.

5. Is there a need to change the current consumer advocacy arrangements in the telecommunications sector? If so, what arrangements would be most effective in delivering consumer benefits, including for those who are most vulnerable?

BIBA has no expertise in this area and so cannot offer a view on this.

6. How can the government support consumers and businesses to fully realise the benefits of data portability across the digital economy?

The Government’s Open Data initiative is a good resource which could be promoted more widely. Consideration could also be given to expanding what is currently available.

7. As technology continues to develop, how do we maintain the right balance between supporting innovation in data use in consumer markets while also preserving strong privacy rights?

BIBA shares concerns that the Financial Services Consumer Panel has regarding the use of data. In their response to the CMA study on Digital Comparison Tools (DCTs), they said:

“We have previously raised concerns about the terms of commercial agreements between DCTs and suppliers, and the extent to which they harvest and use consumers’ data. Greater access to data can provide consumers with a more comprehensive service. However, the information DCTs make available must be useful, comparable, and enable consumers to make choices based on factors that are important to them. It should be possible for DCTs to produce useful non-price search criteria without overwhelming consumers with information. This is particularly relevant for insurance products where the focus on price alone has led to the hollowing out of policies.”

We also share the Information Commissioner’s concerns that giving PCWs more access to customer data, that could result in them being bombarded with intrusive marketing messages. They commented that CMA plans to increase the amount of data they are given would be an “intrusion on individuals’ privacy” and could lead to “overwhelming and unwarranted” levels of marketing mail sent to consumers.

We therefore recommend that no additional legal or regulatory obligation to share data with PCWs/DCTs in the insurance sector is implemented.

8. What challenges do digital markets pose for effective competition enforcement and what can be done to address them?

Please see above answers.

9. Is the legal framework that covers consumer-to-consumer transactions appropriate to promote consumer confidence?

BIBA has worked with the trade body for the sharing economy, Sharing Economy UK, to ensure adequate insurance can be arranged to cover those in this area. This was previously a difficult risk to place as the insurance model has shifted from one of owning an item, to one of using an item – something that brings with it new liabilities. We now have a number of insurance brokers who are able to cover all aspects of the sharing economy and they can be found via BIBA’s Find-a-Broker service at biba.org.uk.

We believe this work has benefitted people and businesses in the sharing economy as well as providing security and protection for consumer to consumer transactions.

10. In what circumstances are personalised prices and search results being used? In which circumstances should it not be permitted? What evidence is there on harm to consumers?

Insurance is a personalised service with many factors going in to determining a policyholder’s risk profile – and therefore their premium. It is important that any regulatory/legislative action in this area recognises the need of the industry to price individually.

BIBA has submitted evidence some time ago to the Financial Conduct Authority (FCA) when it was reviewing the activities of PCWs, of consumers entering specific requirements, but the search results not accurately reflecting customer demands. This has the effect of consumers believing that had obtained personalised quotations that met their stated requirements, when they had not. Examples of this include where a consumer had requested no excess and were provided with quotes for policies featuring excesses.

Further information on this is available upon request.

11. Should terms and conditions in some sectors be required to reach a given level of comprehension, such as measured by online testing?

BIBA feels that the weight of documentation insurance brokers need to send policyholders, as determined by the Financial Conduct Authority, is overwhelming and results in very little information actually being consumed.

While the FCA is unable currently to excuse firms from providing customers with information and documentation prescribed within European legislation, it does not seem to account for these European demands or the guidance from its own behavioral economics team, when adding its own requirements.

The sheer quantity of documentation required to be provided to customers is surely counter-productive. The impact on every aspect of the client journey slows the insurance arrangement process:

Typically a general insurance broker performing their job to a professional standard and ensuring compliance with relevant regulation now provides fourteen different documents to customers:

1. one policy document of numerous pages containing details of what is and is not covered;
2. one policy schedule identifying which parts of the policy apply to that customer;
3. at least one certificate (e.g. Motor or Employers Liability);
4. demands & needs statements (EU prescribed)
5. statements of fact;
6. a summary of cover;
7. notices to policyholder (If it is a renewal of an existing policy)
8. terms of business (to include mandated information on the broker, complaints and compensation procedures, etc.);
9. instalments agreements (including the mandatory SECCI form);
10. invoices
11. advice on cover deemed to be missing from their programme;
12. alternative quotations where suitable cover may be available elsewhere at a cheaper price;
13. details of additional services available
14. A data protection fair processing notice

12. How can we improve consumer awareness and take-up of alternative dispute resolution?

The insurance industry is subject to the mandatory scrutiny of the Financial Ombudsman Service (FOS) as is the wider financial services sector.

In other sectors, such as the letting agents market, we understand that there are three ADR services, which could lead to consumers not knowing to whom to refer on an unsatisfied complaint.

13. What model of alternative dispute resolution provision would deliver the best experience for consumers?

BIBA can only write with any certain knowledge of the financial services sector, where a single ADR service operates. Whilst FCA-regulated firms are obliged to cooperate with the FOS, other firms (such as firms operating in the UK under a financial services passport) may voluntarily submit themselves to be bound by FOS decisions.

14. How could we incentivise more businesses to participate in alternative dispute resolution?

Again only speaking from our own experience; in financial services, participation in the assigned ADR service is mandatory.

15. Should there be an automatic right for consumers to access alternative dispute resolution in sectors with the highest levels of consumer harm?

BIBA would bow to HM Government’s own view on this point.

16. What changes are needed to ensure local and national enforcers work together within an effective framework for protecting consumers?

BIBA understands that the estate agency sector has the Powys Trading Standards which operates as a centre of excellence to support other local trading standards teams.

17. Do you agree with the initial areas of focus for the Consumer Forum?

The idea of a consumer forum has merit; however, we would also like to flag the work done by the Financial Services Consumer Panel. The Panel are an independent statutory body, set up to represent the interests of consumers in the development of policy for the regulation of financial services.

They work to advise and challenge the FCA from the earliest stages of its policy development to ensure they take into account the consumer interest.

It is crucial that any Consumer Forum does not replicate this work and we would suggest that the Panel is given the lead on financial services, rather than this to be part of the Forum’s remit.

18. Have the 2014 reforms to the competition regime helped to deliver competition in the UK economy for the benefit of consumers?

BIBA again speaks from our experience of the financial services sector only. The FCA’s application of its competition powers leaves BIBA with some doubt in this area.

Similarly, the CMA’s involvement in the private car insurance market has resulted in an increase in the volume of information that must be given to consumers regarding their no claims discount; none of which gives consumers an accurate picture and so is valueless towards helping consumers make an informed decision.

19. Does the competition regime provide the CMA and regulators the tools they currently need to tackle anti-competitive behaviour and promote competition?

We believe that the CMA has all the tools it needs to effectively tackle anti-competitive behaviour, as they have demonstrated in various sectors in recent years.

Whether the outcomes from the exercise of their powers (as we highlight in response to question 18) always produce good customer outcomes, is open for debate.

20. Is the competition regime sufficiently equipped to manage emerging challenges, including the growth of fast-moving digital markets?

We believe the FCA is well equipped to manage emerging challenges, as demonstrated by their work on Big Data, Social Media advertising and work with innovators who use tools such as machine learning and AI as part of their Sandbox initiative.

21. Do you agree with the approach set out in the draft Strategic Steer to the CMA? Are there any other areas you think should be included?

As well as considering competition between providers, consideration should also be given to ensuring that the UK remains a competitive market place in a post-Brexit environment. The FCA’s predecessor, the Financial Services Authority (FSA), used to have a global competition remit which sought to ensure that the UK was a competitive with other jurisdictions around the globe. The FCA does not have this remit and the FCA’s reputation for gold-plating regulation is something that can be off-putting for firms looking to do business or set-up in the UK. This can ultimately result in less competition. This is an area we would encourage Government to look again at.

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BIBA Response to the EC’s Motor Insurance Directive REFIT evaluation https://www.biba.org.uk/press-releases/biba-reponse-motor-insurance-directive-refit/ Fri, 25 May 2018 12:31:28 +0000 https://www.biba.org.uk/?p=29945 Yesterday the EC announced its proposals on changes to the Motor Insurance Directive in light of a number of court rulings that have affected its

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Yesterday the EC announced its proposals on changes to the Motor Insurance Directive in light of a number of court rulings that have affected its application and has identified five areas for clarification. BIBA’s views on the proposals are set out below.

  1. Insolvency of an insurer

BIBA is satisfied with the EC’s proposal in relation to compensation arrangements ultimately being the responsibility of the home member state of the insurer concerned.  The Financial Services Compensation Scheme already fulfills this function in the UK.

  1. Claims history statements

BIBA welcomes the equality of treatment of claims history statements across differing member states but expresses caution in the detail of how these might be required to operate.  BIBA believes that any prescriptive requirement for uniformity will create an administrative burden, significant IT system changes and add cost into a system which already works well in the UK.

  1. Uninsured driving.

The current Motor Insurance Directive prohibits cross-border motor insurance checks on vehicles entering a national territory. BIBA welcomes the proposal from the EC that will  allow, without interfering with free-movement,  checks on the validity of insurance especially if they are driven by technology, are  non-discriminatory, not aimed exclusively at insurance verification and do not require the vehicle to stop.

  1. Minimum amounts of cover:

BIBA supports the harmonisation proposal that there should be equal minimum levels of protection across the EU member states to ensure that there is a sufficient level of minimum protection across the EU for the innocent parties to motor vehicle accidents in relation to personal injury compensation and damage to property irrespective of the type of vehicle.

  1. Scope of the directive (VNUK)

The EC is proposing to clarify the definition of “use of a vehicle” and incorporate the judgements of the Court of Justice of the European Union in the cases of Vnuk, Rodrigues de Andrade and Torreiro. The proposal is to change the definition to “use of a vehicle means any use of such vehicle, intended normally to serve as a means of transport, that is consistent with the normal function of that vehicle, irrespective of the vehicles characteristics and irrespective of the terrain on which the motor vehicle is used and of whether it is stationary or in motion”.  While the EC has indicated that the proposal clarifies the concept of use and where compulsory insurance therefore applies BIBA still has concerns over the application of this definition which we believe still lacks clarity.

Martin Bridges, Technical Services Manager at BIBA said: “Relating the need for compulsory motor insurance to rely on operating in respect of any ‘use, intended normally as a means of transport, consistent with the normal function of the vehicle…. irrespective of the terrain…’ will potentially still bring many more vehicles into scope from mobility scooters to motorsports because of the because of the possible legal interpretation of the definition of ‘transport’.  This leaves considerable uncertainty for potentially vulnerable customers wondering if they now need to buy insurance for a disability vehicle.”

Graeme Trudgill, BIBA Executive Director said: “Following the original Vnuk ruling BIBA, the UK Government, a number of other EU states and insurance bodies put forward a solution that would have brought considerably more clarity to this situation and prevented these potential unintended consequences.  In the Commission’s roadmap document one of the key suggestions was to consider changing the definition of a vehicle to ‘one used in traffic’.  This would have resolved many of the issues, however, the EC has moved towards motor insurance being the compulsory solution for liability wherever a vehicle is used – effectively including on private land. This goes beyond current UK legislation.

Currently, under UK law, users of a vehicle such as a tractor or fork-lift truck being used on private land would simply purchase public and employer’s liability insurance to fund any liability for compensation. It is unhelpful that customers will now potentially have to buy wider cover for many more vehicles types being used in more places.

We intend to continue to express our concerns that these proposals may increase bureaucracy, cost and uncertainly for personal and commercial policyholders, resulting in potentially significant unintended consequences in areas such as motorsports and for vehicles not previously requiring motor insurance.”

Ends

BIBA view of Vnuk

https://www.biba.org.uk/press-releases/biba-comment-joint-industry-response-motor-insurance-directive-refit/

EC press release

http://europa.eu/rapid/press-release_IP-18-3731_en.htms

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BIBA’s response to the Department for Transport consultation on reporting road accidents to Police https://www.biba.org.uk/consultations/bibas-response-to-the-department-for-transport-consultation-on-reporting-road-accidents-to-police/ Wed, 25 Apr 2018 10:05:13 +0000 https://www.biba.org.uk/?p=29614 The post BIBA’s response to the Department for Transport consultation on reporting road accidents to Police appeared first on British Insurance Brokers' Association.

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British Insurance Brokers’ Association-Budget submission – 22nd September 2017 https://www.biba.org.uk/consultations/british-insurance-brokers-association-budget-submission-22nd-september-2017-2/ Tue, 21 Nov 2017 09:01:08 +0000 https://www.biba.org.uk/?p=28418 British Insurance Brokers’ Association-Budget submission – 22nd September 2017   The Negative Impact of recent Insurance premium tax Increases Following the spring 2017 budget, the

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British Insurance Brokers’ Association-Budget submission – 22nd September 2017

 

The Negative Impact of recent Insurance premium tax Increases

Following the spring 2017 budget, the Financial Secretary to the Treasury wrote a letter stating that there was no evidence to show there was an increase in uninsured driving. However on August 2017 the Motor Insurers Bureau (MIB) – the official body set up to deal with uninsured driving, reported that for the first time in more than a decade, they saw an increase in the number of claims made following accidents with uninsured drivers. This increase was a significant 10%.

The Majority of Industry experts including BIBA and large brokers like the AA attribute this increase in uninsured driving directly to the doubling of IPT, from 6% to 12% in a 20 month period up to June 2017.

Insurance – reduces the burden on the state

Insurance is a social good. It allows people to take responsibility for themselves and their assets, and reduces the burden on the state should things go wrong. Additionally, the transferring of risk through insurance allows business to function. It gives our country resilience and businesses the peace of mind that when the unexpected happens, they will be given the assistance they need to be able to continue trading. Without it, the economy would grind to a halt as very few businesses possess the ability to carry their own risk without the need for insurance. In summary, insurance is vital.

Certain classes of insurance such as motor and employers’ liability are also compulsory. Whilst there are very good reasons for this, it means that these policyholders have to pay the tax.

Insurance Premium Tax was introduced by then Conservative Chancellor Kenneth Clarke in 1993. Previous to this, there was no tax attached to this insurance as previous Governments saw this as a social good.

Insurance Premium Tax (IPT) is a tax on general insurance premiums. There are two rates;

  • Standard rate: 12% per cent (home, contents, motor, van, pet, business, health)
  • Higher rate: 20 per cent (travel insurance, mechanical/electrical appliances insurance and some vehicle insurance).

The tax is paid on insurance premiums, which in turn are paid by customers, similar to the way VAT is charged on goods or services and that charge is passed on the purchasers of these.

Between 1997 and 2011, a period of 14 years, there were only two increases of Insurance Premium Tax, introducing a modest rise from 4% to 5% under Rt Hon Gordon Brown, and 5% to 6% under Rt Hon George Osborne MP. The recent increases the industry has seen are beyond historical precedent (figure 1). In a period of around 20 months, there have been three increases in the rate of insurance Premium Tax, doubling the rate from 6% to 12%.

BIBA members feel strongly that this gross inflation of the rate of tax materially affects affordability and limits the ability of the industry to pass on savings made through joint initiatives between the industry and Government to tackle fraud.

In its consultation ‘Reforming the soft tissue injury (whiplash) claims process’[i], Ministry of Justice Minister, Lord Keen, stated “Millions of motorists could save an average of £40 on their annual car insurance from these proposals to tackle the unacceptable number of claims”. However, the ability of the industry to be able to do this is seriously impacted by the level and frequency of the increases to Insurance Premium Tax, compounded by the Ogden changes, which even after the recent announcement form the Lord Chancellor will still lead to higher catastrophic injury awards and therefore higher premiums  when compared to 12 months ago.

Telematics-graph1

Motor insurance

According to the AA British Insurance premium Index, in the 12 months up to the end of quarter two 2017 motor insurance premiums including IPT increased by almost 20% (19.6%) this is partly due to IPT as well as the change to the Ogden discount rate and claims inflation.

Insurance Premium Tax is a regressive tax, hitting hardest those who pay more for premiums. In particular, those on low incomes, those who live in high-risk areas and young drivers are some of the most adversely affected.

For young drivers in particular, the most recent increases in IPT have significantly pushed up premiums. For a £1,500 policy, the IPT contribution has increased from £90 at 6% to £180 at 12%, in a space of around 20 months. This is level of increase is clearly unsustainable.

Helping Young Drivers – Insurance Premium Tax Relief for young drivers using telematics

Telematics policies can offer savings of up to 25% for responsible young drivers. Data provided by the ‘black-box’ technology builds a personalised risk profile based on an individual’s actual driving.  Ongoing monitoring of driving behaviours encourages better, safer road use.

Research from insurance provider Ingenie shows that telematics-based feedback can halve a driver’s risk of crashing over their first policy year. In addition, BIBA member Marmalade, specialists in telematics insurance for young drivers, has seen exceptionally strong safety results. Studies show that 1 in 5 young drivers have an accident within the first 6 months of passing their test, yet with Marmalade that figure significantly improves to only 1 in 16, making their young drivers three times safer.

Research by the UK’s 3rd largest private car insurer, Ageas, together with the Road Safety Foundation studied the business case behind implementing Insurance Premium Tax relief (a zero rate of IPT) on telematics insurance policies for the under 25s[ii].

The research showed that over a seven year period, the reduction in accidents resulting in killed/seriously injured road users would be 259 in year 7, presenting an economic saving of £829m over the period, compared to lost revenue from IPT of £588m (at the current rate of 12%).

BIBA believes this is a credible policy intervention the Government could make that would limit the impact of previous IPT increases on the group most acutely impacted by it, whilst at the same time making roads safer.

 

Year
Total Telematics policies bought by under 25’s based on 83% of total annual telematics sales
(increasing at 75,000 annually)
Lost IPT
(£m)
Policies induced
(this represents induced purchase of an additional 35,000 telematics policies each year following reduction in IPT to zero)
Killed / seriously injured
People reduce by 37 each year. This is because of the reduction in IPT leading to a greater take up of telematics policies which reduces accidents by at least 30%
Economic Cost savings
(NHS and benefit costs)
Each KSI £400,000
 
This increases by approximately £30M a year :
(37 fewer crashes x £400,000 saving x 2)
Present value cost (£M)
Present Value Benefit
(£m)
1 325,000 57 35,000 37 30 55 29
2 400,000 66 70,000 74 59 62 55
3 475,000 75 105,000 111 89 68 80
4 550,000 55 140,000 148 118 73 103
5 625,000 84 175,000 185 148 78 125
6 700,000 93 210,000 222 178 73 144
7 775,000 102 245,000 259 207 78 163
               
TOTAL £M
588 1036 829 487 699

 

It demonstrated that over a seven year period, not only would there be 1,036 fewer KSI accidents but also the cost benefit for HM Treasury would be £212 Million (£699M present value of benefits – £487M present value costs)

We feel there is significant merit in Government considering the policy in order to help deliver safer roads, enable young people to take to the roads and increase the revenue that is taken into the exchequer.

Telematics is becoming increasingly popular. Each year, BIBA conducts research into the number of telematics policies live in the UK. By the end of 2016 the number exceeded three quarters of a million for the first time[iii]. The survey includes information from the leading telematics brands in the UK to determine the number of live policies which, on a like for like basis, shows an increase of nearly 25% on the 2015 figure. However it still represents only a fraction of the insurance policies covering the 30 Million plus vehicles in use and a zero IPT rate would provide much needed stimulus as well as serving as a prudent ‘nudge’ towards a product delivering significant road safety improvements.

Growth in live telematics policies (751,000 live policies at end of 2016)

Telematics-graph

Flood risk areas

Those living in flood risk areas are also impacted heavily by these increases in Insurance Premium Tax. Often, these communities face difficult decisions as to whether they can afford flood insurance or to forgo cover. An increase in the cost of insurance further puts insurance out of the reach of many, especially those outside of the scope of Flood Re.

Flood Re is a transitional arrangement, lasting for a total of 25 years. It is crucial that when the market moves to a risk-reflective pricing model at the end of the scheme, that insurance is not out of reach for those that need it.

Further, the previous IPT increase from 9.5% to 10% was ring-fenced to pay for flood defence spend. Flood defence spending is vital to being able to deliver an affordable risk reflective market at the end of Flood Re, as well as to deliver an effective market for those currently outside of the scope of Flood Re.

BIBA recently launched a new commercial insurance scheme for businesses that will also include flood cover for many commercial premises and let properties located in areas at risk from flooding.

Worked with the market to develop an innovative product that will both help them meet the usual commercial insurance needs of their small and medium sized clients (SMEs) and provide flood cover for many businesses risks that are ineligible for Flood Re.

The commercial scheme backed by the A+ rated security of Lloyd’s underwriting capacity, uses an advanced mapping facility developed by Landmark which pin-points exactly the location and features of an individual property. Having this degree of specific and detailed risk reflective information allows each individual business or property to have insurance that is based on its own specific risk. It also recognises where meaningful resilience or resistance measures have been installed to decrease the risk or size of loss that may occur.

The scheme also offers a high degree of customer choice giving the option to ‘buy-back’ any flood excess that is applied because of the business location meaning customers can choose the amount of risk they want to bear themselves.

Crucial to the success of this however is sustained investment in capital projects, as well as routine maintenance of culverts, highways and defences. BIBA seeks clarification of this spending commitment and that the IPT contribution to fund flood defences will continue to be ring-fenced for this purpose from the increase that took place in October 2016.

Other jurisdictions

Another argument Government previously put forward for raising the rate of IPT is to bring us in-line with rates in Europe. However, The UK is now has the sixth highest rate of insurance taxation in Europe, behind only Germany, Greece, Italy, the Netherlands and Finland[iv]. The rate in Germany is often given as an example of the UK not being the most expensive regime in Europe, however it is worthy of note their regulation of insurance brokers is paid through general taxation, where in the UK some BIBA members pay comfortably over £1m each year in fees.

Research, conducted by London Economics shows that for both medium and large-sized insurance broking firms, the cost of regulation as a proportion of income in Finland, Germany, Italy and the Netherlands is not as high as it is in the UK. This demonstrates that whilst their rate of taxation may be higher, they are not subject to the same expensive regulation as we are here in the UK. Implementing a high-tax regime at the same time as having one of the most expensive regulatory systems in the world puts the UK at a competitive disadvantage, precisely at a time global competitiveness is more important than ever following the decision to exit the EU.

 

 

Direct cost of regulation as a proportion of income

Jurisdiction Medium insurance broking firm Large insurance broking firm
(€) (%) (€) (%)
Finland 6,400 0.13% 181,000 0.18%
Germany 0 0.00% 0 0.00%
Italy 4,264 0.09% 80,264 0.08%
Netherlands 13,194 0.26% 97,371 0.10%
United Kingdom 16,699 0.33% 314,928 0.31%

Case study on the effect of IPT

Mr Dearsley a retired local government officer lives with his wife Karla an author and their two Bischon Frise dogs Harry and Sophie. He has insurance policies for Motor, Home, Private Health and Pets and the recent doubling in the cost of IPT has had a considerable impact of the cost of these policies.

Mr Dearsley shares BIBA’s concerns over the increases to IPT due to the negative effect it has had on their family finances

Mr Dearsley’s now pays £242.96 more in insurance premium tax every year

Recent Premium excluding IPT 6% IPT contribution  (October 2015 rate) 12% IPT contribution (rate from June 2017)
Pet insurance for two dogs £2315.09 £138.91
Total: £2453.99
£277.81
Total: £2592.90
Private Health £1403.1 £84.18
Total: £1487.19
£168.37
Total: £1571.38
Home Insurance £168.30 £10.10
Total: £178.4
£20.20
Total: £188.5
Car Insurance £162.90 £9.77
Total: £172.67
£19.54
Total: £182.44
Total £4049.39 £242.96
Total: £4292.26
£485.92
Total:4535.22

Who else is affected?

IPT is paid by the majority of UK small, medium and large business, but also personal lines customers including:

20.4 million Home owners/renters with contents insurance

20.1 million Drivers with home insurance

3.2 million Home owners with mortgage protection

1.9 million People with private medical insurance

3.4 million Pet owners

Our members are reporting back that following the increase to 12% they are receiving requests to reduce and cancel cover and increase excess/ deductibles from both personal and commercial customers.

Summary of the issues

  • BIBA believes that the recent increases are contrary to the stated HMRC policy objective IPT01300 as measured by incidents caused by uninsured driving, which have now increased by 10%
  • There is now evidence that the recent doubling of Insurances Premium tax has led to a lower take up of motor insurance by young drivers.
  • The UK now has one of the highest rates of Insurance Premium Tax in Europe; however, also has one of the most expensive regulatory regimes in the world.
  • New IPT income that was generated specifically by an increase of 0.5% to improve flood defences should focus on areas where accessing insurance is the most challenging.
  • We have the most expensive financial regulatory system in the world but our regulator has no requirement to consider the international competitiveness of UK firms

Calls to action

  • For Government to reduce the rate of Insurance premium tax (IPT) for young drivers using telematics policies to zero, acting as an incentive for greater take up of these policies which deliver significant improved road safety results and result in cheaper premiums.
  • BIBA accept that part of the increase was to flood much needed flood defences, however the increase has gone too far and BIBA now call for a reduction in the standard rate of Insurance Premium tax to 10%
  • For Government to commit to sustained flood defence spend and the finds from the October 2016 increase in IPT will continue to be ring-fenced for this purpose.
  • For the FCA to be given a balancing statutory objective or strong formal guidance to consider the international competitiveness of the UK’s financial markets

For further information please contact:

Graeme Trudgill FCII

Executive Director

Direct Tel:  020 7397 0218

Email: trudgillg@biba.org.uk

 

 

 

[i] https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/581387/reforming-soft-tissue-injury-claims-process.pdf

[ii] https://www.dropbox.com/sh/tavfplf855jwpt8/AAA0g5UdS7iHXAZGvV9M5Urza?dl=0

[iii] https://www.biba.org.uk/press-releases/biba-research-reveals-750000-live-telematics-based-policies/

[iv] https://www.abi.org.uk/~/media/Files/Documents/Publications/Public/2016/KeyFacts/EUIPT.pdf

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Reducing unnecessary regulation of financial services https://www.biba.org.uk/consultations/reducing-unnecessary-regulation-financial-services/ Fri, 08 Sep 2017 07:58:03 +0000 https://www.biba.org.uk/?p=27887 Dear  House of Lords PQ: Reducing unnecessary regulation of financial services The British Insurance Brokers’ Association (BIBA) is the UK’s leading general insurance intermediary organisation

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Dear 

House of Lords PQ: Reducing unnecessary regulation of financial services

The British Insurance Brokers’ Association (BIBA) is the UK’s leading general insurance intermediary organisation representing the interests of insurance brokers, intermediaries and their customers.

BIBA membership includes just under 2,000 regulated firms, employing more than 100,000 staff.  General insurance brokers contribute 1% of GDP to the UK economy, they arrange 52% of all general insurance and 78% of all commercial insurance business.

Research conducted by London Economics has shown that the Financial Conduct Authority (FCA) is one of the most expensive regulatory systems in the world and that cost continues to increase.  In the last three years the cost of regulation for small brokers has increased by 70% from 4% to 6.8% of income, an unreasonable and disproportionate burden.

I have been advised that on Wednesday 6th September (3.15pm) there is a House of Lords PQ: Reducing unnecessary regulation of financial services and reviewing FCA practises (led by Lord Leigh of Hurley, Con).

If you were planning to attend, I thought I might share with you some thoughts on this which link to this debate.

Before the Financial Conduct Authority (FCA) was formed, its predecessor (the Financial Services Authority (FSA)) had a general duty under section 2.3 of the Financial Services and Markets Act 2000 (FSMA) of:

‘(3) In discharging its general functions the Authority must have regard to —…

(e) the international character of financial services and markets and the desirability of maintaining the competitive position of the United Kingdom;’ 

This duty was removed when FSMA was amended to create the FCA (amongst others).

The FCA does have a competition objective under the amended FSMA but this has an internal market focus.

Given the widely held view that the FCA is known for ‘gold-plating’ EU regulations and as the UK looks to prepare to function effectively in a post-Brexit world, we believe it is time to reintroduce this duty.

I am aware that the FCA resists having the objective. At an oral hearing to the Treasury Committee in November 2011 the then leadership of the FSA seemed to see it as a euphemism for ‘light touch regulation’, but my organisation would contend that it leads to ‘right touch regulation’.

In their more recent Mission paper (https://www.fca.org.uk/publication/corporate/our-mission-2017.pdf) the FCA concludes:

‘FSMA does not give us an objective to promote the ‘competitiveness’ of UK financial services in the context of international markets. But we do believe that ensuring that financial markets work well – in the sense of ensuring integrity through good standards of market conduct, appropriate consumer protection, and healthy competition – will make the UK an attractive place to do business.’ 

BIBA and its members, like many other organisations, fundamentally disagree with this position. An international competitiveness obligation should curtail gold-plating, whilst still permitting regulatory equivalence (or as the FCA likes to call it ‘intelligent copy-out’).

Seen as a burdensome location in which to set up business, unnecessary regulation sees firms not attracted to the UK and with that, comes the lost opportunity for job creation and the knock-on benefits to the economy. This will be particularly felt in a post-Brexit UK, where the nation seeks to establish itself as a global trading centre.

It is worth noting that the ‘other side’ in the EU withdrawal negotiations have had no reluctance to task their supervisory authorities with an international competitiveness agenda. The three European Supervisory Authorities for example (EIOPA, ESMA and EBA – created by the EU as a layer above national supervisory authorities and which seek to develop regulatory convergence across the Member States) have had built into the Regulations that created them, the following requirement:

‘The Authority should take due account of the impact of its activities on competition and innovation within the internal market, on the Union’s global competitiveness, on financial inclusion, and on the Union’s new strategy for jobs and growth.’

We hope the above helps to inform you in preparation for the above debate. We would be happy to discuss any of our points further if this would assist.

Yours sincerely

Graeme Trudgill FCII
Executive Director

Letter-to-Peers-regarding-regulation-of-financial-services

 

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Damages Discount Rate (Ogden) Consultation – how it should be set in the future https://www.biba.org.uk/consultations/damages-discount-rate-ogden-consultation-set-future/ Fri, 04 Aug 2017 11:03:29 +0000 https://www.biba.org.uk/?p=27658 The BIBA response to the consultation on possible changes to setting the Ogden discount rate is set out below. Q1: Do you consider that the

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The BIBA response to the consultation on possible changes to setting the Ogden discount rate is set out below.

Q1: Do you consider that the law on setting the discount rate is defective? If so, please give reasons.

Yes, we do believe the law on setting the discount rate is defective, as it has been interpreted in different ways by two Lord Chancellors. Lord Irvine had previously incorporated tax that is paid on investments into the discount rate as well as considering the impact on defendants as well as claimants, whereas the recent decision by Liz Truss, the current Lord Chancellor did not take into account tax or the impact on defendants. In fact in the current Lord Chancellor’s statement following her review of the discount rate, she said she could not take into account defendants in to this decision – contrary to Lord Irvine’s approach.

Problems that the existing law have created include:

A -The insurers had to cope with a dramatic change to their business model to reflect the requirement to massively increase reserves across the industry. Willis Towers Watson have estimated the impact of the change on insurers as a one off reserve charge of approximately £5.8 billion, which represents 56% of the overall claims cost of £10.43 billion in 2015 (the most recent figures available). With an anticipated £868 million per annum increase in the cost of motor insurance as well as a estimated increases of £57 million per annum for Employers liability insurance.

We have been provided with an actual example by a leading insurer of the massive increase in their costs on one impacted claim, where a reserve for a private motor personal injury claim of £9 million has had to be increased following the Ogden rate change to £22 million.

Another example brought to our attention, is of a recent case involved a 7 year old boy at the date of accident who suffered catastrophic injury including to his spine, the reserve at 2.5% Discount rate had been £10.4 Million, but the change to -0.75% has seen this increase to £22.7 million.

BIBA fully supports the position that a severely injured person, particularly someone who experiences a life-changing injury at a very young age, receives appropriate support. We are mindful though, of the impact on the wider insurance-buying community (see C below).

The changes to the multipliers are significant also. The younger the claimant, the more the whole life multiplier will outstrip their life expectancy, this does not reflect a typical real life situation as the life expectancy of a 10 year old previously stood at 78.3 years, moves to 108.3 years.

B -The share prices of some Insurers were negatively impacted, resulting in some giving profit warnings. Investors in insurers will include the trustees of group pension pots and a reduction in the share price of insurers will have a knock-on impact in the actuarial value of the underlying pension pots.

C – Customer premiums have been estimated to increase sharply by PWC, it has been reported that young people could be priced out of owning a car after insurers warned their annual premiums could rise by up to £1,000.

Drivers aged over 65 could also face an extra £300 charge; while the average comprehensive motor insurance policy could increase by up to £75 a year to cope with changes the Government has made to personal injury pay-outs.

This is all happening at the same time businesses are facing a ‘perfect storm’. Insureds now need to buy greater indemnity limits but the prices are increasing and this has been compounded by the fact that insurance premium tax has doubled in the 18 month period between October 2015 and June 2017.

The CBI have also raised concerns regarding the burden on business of this increased cost.

D – New Underinsurance risk: We know of a public liability claim against an EL/PL policy with a £10 million PL limit, held by an SME insured. An £8 million reserve was increased to £15 million using the revised Discount Rate, leaving the insured exposed to an additional £5 million (on top of their policy excess). In the underwriters opinion if the claim settled anywhere near the reserve the insured would be unable to pay their retained share. Assets would therefore have to be sold to meet as much of the claim as possible and it is possible that this could push the insured into insolvency, unless other finance could be accessed.

The Underinsurance concerned is also shared by the CBI.

The date any change to the discount rate comes into effect has not been raised as a point for consideration in this consultation , however, part of the underinsurance problem would be addressed if the decision only impacts on incidents notified post 20th March 2017 or other future review dates.. The problem being that a sudden major change to the rate can render clients underinsured when previous claims already incurred by the business can exceed their limits. Therefore going forward, only new claims from an agreed date should have the new rate applicable, allowing for suitable limits of insurance to then be arranged. This approach would be in line with wider applications of varying changes in domestic law.

E – There are significant concerns around the availability of capacity in liability and motor going forward. This includes smaller insurance carriers and those based in overseas territories such as Gibraltar.

BIBA is also seeing some insurers reducing their limits under liability policies.

The confusion, lack of clarity and uncertainty that has been created by this situation leads BIBA to conclude that primary legislation is required to bring greater clarity to the process of setting the discount rate. This explained further in our response to question 14.

 

Q4: Please provide evidence of how claimants actually invest their compensation and their reasons for doing so.

BIBA does not have data on this, but the Money Advice Service, which was set up by Government; provide advice on what to do after receiving a lump-sum payment: https://www.moneyadviceservice.org.uk/en/articles/making-an-investment-plan and https://www.moneyadviceservice.org.uk/en/search?query=lump+sum. At no point does it advise to invest in ILGS. Further, the advice page on buying Gilts or IGLS states:

Fixed interest securities might be suitable as part of a mix with other types of investment, in order to adjust the overall amount of risk you’re taking. (https://www.moneyadviceservice.org.uk/en/articles/fixed-interest-securities-gilts-and-corporate-bonds).

 

Q5: Are claimants or other investors routinely advised to invest 100% of their capital in ILGS or any other asset class? Please explain your answer. What risks would this strategy involve and could these be addressed by pursuing a more diverse investment strategy?

Most prudent independent financial advisers would provide advice to invest as appropriate to the investors own individual unique circumstance.

Investing in a single asset class is more risky than investing in a mixed portfolio. We recently spoke with an individual who retired from their firm and approached a financial advisor for help in making some longer term investment with some of their retirement funds. They said that that being at the end of their career and looking to full retirement, they wanted their risk exposure to be minimal. They have been tracking the performance of their investment since it incepted in October 2013 and it is running at a little over 6% per annum.

Hence BIBA’s view is if someone can obtain that sort of return on a relatively low risk investment how can the -0.75% discount rate be justified?

We believe it is very unlikely that a prudent investor with appropriate advice would receive a negative return.

Q9: Do claimants receive investment advice about lump sums, PPOs and combinations of the two? If so, is the advice adequate? If not, how do you think the situation could be improved? Please provide evidence in support of your views.

We do believe that advice is freely available, but BIBA is not aware of how customers are aware of, or directed towards obtaining this advice. We note that the previous President, now Secretary of the Association of Personal Injury Lawyers (APIL), was quoted in an APIL press release stating: “Victims who receive high value awards usually take financial advice on how best to invest their compensation”.

Whilst BIBA does not collect information on how claimants invest lump-sum payment awards, we do have members that can assist with this and report that it is not unreasonable to achieve a 6% return with a low risk strategy.

It is of interest to note that many claimant law firms also offer financial advice services on how to invest their payments, with some anecdotally advising rates of return of between 3-4%. Examples of law firms that offer these services include Irwin Mitchell and the Brain Injury Group. Additionally, the APIL code of conduct states:

APIL members recognise the need to… ensure that clients have the opportunity to receive advice on the investment and/or use of damages: https://www.apil.org.uk/files/code-of-conduct-september-2016.pdf.

This demonstrates that investment advice does indeed form part of the consideration lawyers should be giving as part of their service.

Further, anecdotal evidence from a press article suggests that Frenkel Topping, a firm specialising in advising clients who have received personal injury payouts, said in a recent statement to the market that the Lord Chancellor’s decision to change the Odgen discount rate from 2.5% to -0.75% would significantly boost the company’s performance in the next three years, revising upwards their asset growth expectation for 2018 and 2019 by £80 million. This is another clear indicator that claimants do not invest in IGLS, but often take financial advice on how and where to invest their payment award. http://citywire.co.uk/new-model-adviser/news/national-ifa-expects-80m-boost-from-personal-injury-payout-change/a997113

The £80M Frenkel Topping upward revision demonstrates how, due to increased awards, money will be taken from insurer reserves intended for policyholder compensation, and be converted to further profits the legal/investment/personal injury claims sectors. This upward cost leads to increases in policyholder premiums and serious financial pressures on the insurance sector.

Q10: Do you consider that the present law on how the discount rate is set should be changed? If so, please say how and give reasons.

We strongly recommend the law be changed due to the interpretation issues and subsequent consequences outlined in our answer to Q1.

Q11: If you think the law should be changed, do you agree with the suggested principles for setting the rate and that they will lead to full compensation (not under or over compensation)? Please give reasons.

We agree, people should not be over or under compensated. This matches with the principal of indemnity which is a key legal principle of insurance. Further, we note with interest that APIL’s code of conduct states:

APIL members recognise the need to… maximise the amount of compensation receivable in the hands of the client. https://www.apil.org.uk/files/code-of-conduct-september-2016.pdf.

This is not the same as full compensation and when investment income is take in to account, we believe that the change to a -0.75% discount rate could see many claimants over-compensated due to the returns achievable – even with a low-risk investment strategy.

Q12: Do you consider that for the purposes of setting the discount rate the assumed investment risk profile of the claimant should be assumed to be: (a) Very risk averse or “risk free” (Wells v Wells) (b) Low risk (a mixed portfolio balancing low risk investments). The Discount Rate Consultation Paper 39 (c) An ordinary prudent investor (d) Other. Please give reasons.

This will depend on the circumstances of the individual, some may be in a better financial position than others and more able to take higher risk approach. We understand that advice commissioned by the Government and received in 2015 stated a discount rate of 0.75% could be achievable if the investment portfolio for a claimant was deemed to be 50% ILGS and 50% best risk investments (which comprises of 25% corporate bonds, 15% overseas developed country bonds and 10% equities). We disagree with the catch-all assumption that claimants are very risk averse and would invest their damages in ILGS as risk appetite is an individual preference.

Q14: Do you agree that the discount rate should be set on the basis that claimants who opt for a lump sum over a PPO should be assumed to be willing to take some risk? If so, how much risk do you think the claimant should be deemed to have accepted? Please also indicate if you consider that any such assumption should apply even if a secure PPO is not available. Please give reasons.

The case of Wells v Wells in the court of appeal stated that the claimant should not be treated any differently from any ordinary investor, to do so would put them in a more privileged position.

Q17: Should the court retain a power to apply a different rate from the specified rate if persuaded by one of the parties that it would be more appropriate to do so? Please give reasons.

BIBA has faith in UK judges to look to apply a different rate only in exceptional circumstances, where to do so would achieve an equitable outcome.

Q20: Do you agree that the law should be changed so that the discount rate has to be reviewed on occasions specified in legislation rather than leaving the timing of the review to the rate setter? If not, please give reasons.

This would create greater certainty and avoid the massive changes and huge consequences we have outlined in our answer to Q1. However there is some concern that this could create a log jam in the courts as law firms play the system.

Q23: Do you agree that the rate should be reviewed at intervals determined by the movement of relevant investment returns? If so, should this be in addition to timed intervals or instead of them? What do you think the degree of deviation should trigger the review?

One suggestion might be; in addition or instead of a time period review could perhaps be a basket of low risk mixed portfolio investments and when they fall outside a pre agreed ‘standard deviation’ this would trigger a review.

Q24: Do you agree that there should be a power to set new triggers for when the rate should be reviewed? If not, please give reasons.

Yes see Q23.

Q25: Do you consider that there should be transitional provisions when a new rate is commenced? If so, please specify what they should be and give reasons.

Transitional periods may help prevent the significant problems that we have outlined in Q1

Q26: Do you consider that the discount rate should be set by: a) A panel of independent experts? If so, please indicate how the panel should be made up. b) A panel of independent experts subject to agreement of another person? If so, on what terms and whom? Would your answers to the questions above about a panel differ depending on the extent of the discretion given to the panel? If so, please give details c) The Lord Chancellor and her counterparts in Scotland or another nominated person following advice from an independent expert panel? If so, on what terms? d) The Lord Chancellor and her counterparts in Scotland as at present? e) Someone else? If so, please give details.

The decision should ultimately be made by a cabinet minister following formal advice from experts and in consultation with representatives from claimants and defendants from specified and pre agreed groups.

Please note that we have not responded to the remaining 10 questions as they are not as relevant to our Association.

We hope the above aids your deliberations of this issue. We would be happy to discuss any of the points we make above if this would assist.

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The Personal Injury Discount Rate – How it should be set in future https://www.biba.org.uk/consultations/personal-injury-discount-rate-set-future/ Tue, 23 May 2017 10:26:27 +0000 https://www.biba.org.uk/?p=27227 The-Personal-Injury-Discount-Rate-How-it-should-be-set-in-future-BIBA-Consultation-response

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The-Personal-Injury-Discount-Rate-How-it-should-be-set-in-future-BIBA-Consultation-response

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CMA DCTs Market Study: Publication of Update Paper https://www.biba.org.uk/consultations/cma-dcts-market-study-publication-update-paper/ Tue, 23 May 2017 09:49:00 +0000 https://www.biba.org.uk/?p=27217 About BIBA The British Insurance Brokers’ Association (BIBA) is the UK’s leading general insurance intermediary organisation representing the interests of insurance brokers, intermediaries and their

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About BIBA

The British Insurance Brokers’ Association (BIBA) is the UK’s leading general insurance intermediary organisation representing the interests of insurance brokers, intermediaries and their customers.

BIBA membership includes just under 2,000 regulated firms, employing more than 100,000 staff.  General insurance brokers contribute 1% of GDP to the UK economy, they arrange 52% of all general insurance and 78% of all commercial insurance business. Insurance brokers put their customers’ interests first, providing advice, access to suitable insurance protection and risk management. BIBA is a not-for-profit organisation.

Consumers

  1. Should we focus our attention on the consumer groups we identify in Chapter 5 (see paragraphs 5.82 to 5.95) and if not, what groups should we focus on?

We have chosen not to answer this question.

  1. In which sectors do DCTs not currently play a major role but could in principle offer substantial benefits to consumers? Why have they not become established in these sectors?

We have chosen not to answer this question.

  1. How has the growing use of DCTs affected suppliers’ offers to consumers who do not use DCTs in our case study sectors and more broadly? What impact have DCTs had on suppliers’ ability to discriminate between active and inactive consumers? What are the implications for vulnerable consumers?

The effect that Most Favoured Nation (MFN) clauses have had on the personal line insurance market is significant. They are responsible for a price discrimination against customers who choose to go direct. This is due to the fee – referred to as ‘cost per acquisition (CPA). Many BIBA members report typical CPAs of around £60, but over £160 for some commercial motor products – adding significant costs which are ultimately born by the consumer. Many BIBA members would like the opportunity to offer the same product on their own website at a discounted rate, however are hamstrung in their ability to do so by these damaging clauses.

MFNs also encourage insurance providers to rely on providing loss-leading premiums in an attempt to recoup the significant CPAs outlaid to gain the customer. Again, this does not work to promote competition.

MFN clauses were reviewed by the CMA in 2015 and ‘wide’ MFNs were deemed anti-competitive and were subsequently outlawed, meaning that for the first time providers could now offer the same rate on other DCTs. However, ‘narrow’ MFN clauses were allowed to continue, meaning that those same insurance providers are not able to offer the same or lower price through their own website.

MFN clauses are anti-competitive by their very nature as they severely limit the ability of insurance providers to compete. BIBA members find it illogical that a regulator whose remit is to ‘promote competition’ would not remove such a significant barrier to being able to compete.

If BIBA were to recommend one change that could be made to result in a more-competitive market with better outcomes for customers, it would be to extend the ban to narrow MFNs in addition to wide MFNs.

  1. What factors, if any, have we missed that may be holding back consumers from using DCTs?

We believe that this question should be centred more around ‘what factors have we missed that promote better customer outcomes’, rather than an approach that is geared to promoting one form of distribution over another.

As referenced in our responses to the CMA’s consultation, we referenced a review the Financial Conduct Authority undertook in to DCTs, which display their results in a list of providers ranked by a single criterion – in this case price. According to the FCA in their thematic review TR14/11, this leads to a misconception amongst customers that they have received advice:

“Our customer research also indicated that some consumers believed that the PCW had provided them with advice or guidance. They believed that the PCW had provided them with quotes on the best policy for their needs, had assessed the suitability of the policy for them or gave assurance regarding the security of the provider.”

Further, if the insurance industry is seeing their potential customers making the decision to purchase a policy is based upon price alone, this acts a market driver for providers to deliver stripped-back policies that do not necessarily meet the demands and needs of the consumer, but fulfil the goal of being cheap; both in the financial sense as well as in quality. This is not in the interests of consumers, or the insurance industry.

  1. What, if anything, should be done about consumers’ concerns about data sharing and the extent to which they feel in control?

The storage and use of data is becoming increasingly important to consumers the more it is used. BIBA also shares these concerns. There have previously been instances where customers’ information has been sold on for marketing purposes.

We share the Information Commissioner’s concerns that “overwhelming and unwarranted” levels of marketing mail could therefore be sent to households and it would be an “intrusion on individuals’ privacy”.

We believe that plans to enforce data sharing should be shelved, with a greater focus on helping customers understand the products they are buying, rather than a focus on skewing a market to one distribution channel by giving DCTs a commercial advantage.

BIBA has also highlighted issues to do with the way that information is collected by DCTs.

One example of DCTs not providing suitable cover we are aware of is that of a couple looking to buy insurance for their home.

The applicant answered a series of pre-qualifying questions in the DCT’s site, collating information designed to be directed to one or more intermediaries or insurers which, after their own supplementary pre-qualifying data collection, may offer a quotation.

A question for household insurance asked whether the property was located within 400 metres from a river and was answered ‘Yes’. When transferred over to the provider’s website the question changed to within 200 metres of a river and the answer defaulted to ‘No’. As a consequence, the consumer may end up with a policy that was unsuitable for their needs.

When the property flooded, the insurers refused to pay the claim and the insured sought the help of the Financial Ombudsman Service (FOS) to obtain redress.

The FOS decided that the Insured should be permitted to rely upon the answer given to the first question.

  1. What actions, if any, are needed to improve the way consumers use DCTs – including multi-homing and using DCTs’ functionalities such as filtering and ranking?

As referenced in our answer to Question 4, we share the belief of the FCA that ranking on a single criterion, price, leads to the impression that customers have been provided advice. Consumers then make a decision based on price under the misapprehension that the products being compared are similar or broadly similar. Unfortunately, products have been made cheaper by the process of hollowing out and policies at different price-points cannot be compared on price alone.

There should be greater emphasis on ensuring that customers understand the key difference between products, rather than driving decisions on price alone – something which without doubt, does not provide good consumer outcomes.

Further, BIBA members report that a further unintended consequence of MFNs is they reduce the level of multi-homing as they lead to a ‘levelling-out’ of premiums across DCTs. Long-term, we believe that this makes consumers less likely to use multiple DCTs as the same premium can be found on multiple sites.

We are pleased that the CMA have acknowledged in the update paper that that consumers believe DCTs compare all or most of the market. This is not the case and the fact that the same providers have different ‘badged’ products on DCTs further adds to this ‘illusion of choice’ the is presented to consumers.

We are also aware of some DCTs ‘turning off’ providers’ services if their conversion rate isn’t at the level the DCT wants – even if they rank highly in terms of price. This manipulation of ranking criteria promotes some providers over another with little transparency to the customer.

Inputs to DCTs

  1. Have we captured the range of issues that might prevent DCTs from operating effectively?

As referenced in our answer to Question 4, we believe that the focus on this study is two heavily skewed in promoting one distribution channel over another – something which is inherently anti-competitive in its nature. BIBA would like to see a greater focus on better customer outcomes – something which is not dependent on price alone.

  1. Do the issues identified materially affect DCTs’ ability to operate effectively and deliver good consumer outcomes?

The issues identified go some way towards deliver good customer outcomes; however, allowing DCTs to operate effectively by discriminating against other distribution channels is not compatible with that approach.

In our response to the last consultation we reported a particular issue with encouraging churn when it came to pet insurance. Many of the products offered are for accident only, excluding illness cover. The potential impact of this and the importance of illness cover (which is readily available) is not sufficiently made clear to the consumer. If they move provider, usually pre-existing conditions are not covered – effectively meaning that once they move provider, any health condition that pet has had will no-longer be covered. Claims for illness cover can run in to many thousands of pounds and not having cover can leave the owner with a decision of either having to raise the necessary funds, or leave the animal untreated. Promoting churn which has consequences such as these is both unnecessary and unacceptable.

As referenced in our answer to Question 3, MFN clauses lead to an ineffective market that restricts the ability of a direct provider such as insurer or broker to offer a more competitive premium. This is not a good customer outcome.

High CPAs with a lack of downward market pressures acting on them lead to an increased cost of doing business which is ultimately borne by the customer. This is also not a good customer outcome.

An undue focus on price leads to hollowed-out policies and customers being mistaken that they are receiving advice on the best product for them. This also results in poor customer outcomes.

Banning all MFNs would go some way to allowing a balanced market to operate, providing genuine choice, reducing the cost of providing products and would give an opportunity to differentiate on factors other than price, such as quality of cover – something which is difficult to do under the current situation.

  1. Are current or planned initiatives sufficient to address the issues found?

Please see answer to Question 7.

Competition

DCTs’ market position and barriers to entry and expansion

10.What explains the strong position of a specific DCT in each of our case study sectors? What do DCTs do to grow their business in sectors where they appear to be relatively small compared to the leading DCT of the sector?

As referenced in our original response to the consultation, we believe there is a strong correlation between media spend and the strength of the DCT. With advertising spends of between £20-30m per year, this far outweighs bodies such as the Money Advice Service in terms of ability to get a message across.

This huge advertising and marketing spend is funded by the exorbitant CPA fees levied at insurance providers – a cost ultimately borne by the customer.

The grip that existing DCTs have on the insurance sector can be evidenced by the inability of even firms the size of Google to be able to compete in the market.

11.What are the barriers, if any, for DCTs to enter or expand into sectors where they currently do not provide comparison services or where they are currently relatively small?

Please see answer to Question 10.

Agreements between DCTs and suppliers

12.What has been the impact of the removal of wide MFNs in the private motor insurance sector?

The removal of wide MFNs, whilst retaining the ability for DCTs to enforce narrow MFNs has led to a situation where the net result has been very similar to that when wide MFNs were in operation.

BIBA members report a growing number of narrow MFNs into in contracts where previously they were not present. Some members feel this is an endorsement of MFNs by the regulator.

Banning narrow MFNs has not enabled greater competition and has continued to mean that premiums are very similar across multiple DCTs. A lack of divergence in price leads to consumers not using more than one DCT, resulting in a breakdown of competition. The only way to remedy this would be to also ban narrow MFNs.

13.What has been the impact of narrow MFNs in the sectors where we have observed them (home insurance, private motor insurance, credit cards, broadband and flights)?

Please see responses to Questions 3, 6, 8 and 12.

14.What is the commercial rationale for the non-brand bidding and negative matching agreements we have observed (in all of our case study sectors) and what is their commercial and competitive impact?

We have chosen not to answer this question.

15.What is the commercial rationale for the non-resolicitation agreements we have observed (in home insurance and energy) and what is their commercial and competitive impact?

We have chosen not to answer this question.

16.In which other sectors, if any, are (i) wide or narrow MFNs; (ii) non-brand bidding or negative matching; or (iii) non-resolicitation agreements in place? What impacts do they have in these sectors?

We have chosen not to answer this question.

17.Are there any other agreements in place that may affect the effectiveness of DCTs and/or the effectiveness of competition between DCTs (and competition between DCTs and other sales channels)?

We are not aware of any other agreements currently in place that affect competition, however, any regulation must be future-proof to ensure that anti-competitive practices cannot be developed – particularly relating to use and exchange of data.

One fear from the insurance broking sector is that DCTs might offer data on customers in return for other commercial advantages such as guaranteeing that their product wouldn’t appear on other DCTs. As data becomes increasingly important, it becomes a currency in its own right and demonstrates that the concerns the Information Commissioners Office has regarding data sharing agreements has foundation.

One large brand-named insurance intermediary recently had to close with the loss of many jobs because of the reliance of the personal lines market on business from DCTs. When the DCT increased their CPA, the business model was no-longer feasible.

Unbundling and hollowing out

18.How has the growth of DCTs affected product features and/or the product mix in our case study sectors over time? What specific evidence/examples indicate these changes?

DCTs have significantly contributed to a commoditisation of insurance, moving from a system with many differentiated products to a system based upon undifferentiated price competition. As such, the pricing power of the insurer has been weakened, products offering less cover and there is a dangerous tendency to buy the cheapest. This has led to a ‘hollowing out’ of insurance policies – stripping back levels of cover in order to reduce the price and get them to the top of DCT listings. By focusing on price, rather than suitability or value, DCTs are encouraging a race to the bottom.

Further, the constant pressure on price takes away capacity for innovation. Rather than investing in new ways to improve a the value offering or customer’s experience, the driver for the market is to lower prices in order to appear at the top of recommendations from DCTs.

Additionally, for those affected by flood, there is often a desire for reinstatement with more resilient materials – reducing the amount of time they would be out of their homes in the event of a subsequent flood, as well as suppressing the cost of repair.

Often, such materials can be more expensive and reinstating at or to an improved standard would be treated as ‘betterment’ by insurers. Because of the DCT initiated churn in the industry, many insurers are not willing to offer betterment in resilient repair as the real fear is the customer will head on to a DCT at renewal to seek a better rate and the investment from that insurer will be realised by another provider. The role that DCTs play in churn therefore stifles the industry’s ability to respond effectively to a policyholder’s needs.

Price is an aspect of suitability, the latter being an all-encompassing term which describes if a product is the best one for the customer. It is important to note however that there are many other factors that influence suitability and an unhealthy focus on price works to the benefit of no-one – except the DCT.

The approach to advertising most DCTs use is to focus on price rather than suitability. This is demonstrated by the phraseology used such as “save £300 on your car insurance” – rather than focusing on value. Value and cheapness are two entirely different concepts.

As mentioned previously, the Financial Conduct Authority led a thematic review, TR14/11, into price comparison sites in the insurance sector. They found:

  • DCTs did not always ensure that consumers were given the appropriate information to help them make informed decisions. This is particularly important as the FCA is concerned that consumers’ focus on headline price and brand when using DCTs could distract from crucial product features such as policy coverage and terms. By failing to provide clear information, the websites are increasing the risk that consumers may buy products without understanding key features such as level of cover or excess levels and purely focus on the price. While a few websites did provide this information clearly the level of clarity varied significantly depending on the provider.
  • DCTs did not make clear their role in the distribution of the product or the nature of service they provided. For example, some consumers mistakenly believe that the price comparison website had provided them with quotes on the best policy for their individual needs and had assessed the suitability of the policy for them.
  • Where a DCT had vertical integration they did not always disclose this potential conflict of interest, which is against FCA rules.
  • Some DCTs have failed to fully implement FCA guidance published in 2011.

20.What needs to be in place to prevent or mitigate any harmful impact of product unbundling or hollowing out and what can DCTs do about it?

A greater focus should be given by DCTs to help explain differences in product – helping to dispel the myth that price is the only differentiator amongst the products listed.

Further, banning MFN clauses could enable more providers to either offer the same policy at a heavily reduced rate because they are not paying a CPA to a DCT, or to add more cover for the same price. Under MFNs, it is not currently possible to do this.

19.How widespread is the use of product reviews and ratings on DCTs and what has been the impact, if any, of the use of these tools?

There is no evidence to demonstrate that product reviews or product ratings have had any effect on the overwhelming determining factor being anything other than price for the majority of consumers using DCTs. It is also worthy of note that some DCTs default to ranking based on price.

20.What needs to be in place to prevent or mitigate any harmful impact of product unbundling or hollowing out and what can DCTs do about it?

In order to prevent un-bundling and hollowing out, more needs to be done by DCTs to enable customers to understand the products that they are buying, rather than focusing on price alone or marketing materials such as cuddly toys. Proper comparison of a product’s features would go some way to achieving this – rather than the tokenistic approach currently employed.

BIBA has worked closely with Go Compare who we have found to be co-operative with regards to addressing wider issues with DCTs. Their approach, and subsequent feedback from BIBA members is encouraging in terms of providing better customer outcomes.

Regulation

21.What are your views on the issues we list in in Table 8.1 and at paragraphs 8.13 to 8.42 of Chapter 8 and how could they be addressed?

Consumer outcomes should sit at the heart of this work. Currently, there is too much focus on how can we provide the cheapest product rather than a focus on what is the best product for the customer – of which price is only one factor of many.

As referenced above, the FCA’s research found consumers felt they had been giving advice when in fact – none had been offered:

“Our customer research also indicated that some consumers believed that the PCW had provided them with advice or guidance. They believed that the PCW had provided them with quotes on the best policy for their needs, had assessed the suitability of the policy for them or gave assurance regarding the security of the provider.”

This demonstrates that DCTs should be subject to a regulatory framework that takes in to account the service that consumers think they are receiving, not just the service that is actually offered.

22.What is the balance between potential benefits and risks in introducing a cross-sector approach? What would be the most effective approach(es), and why?

A cross-sector approach might lead to an un-level playing field as financial services is much more heavily regulated compared to other sectors. As per our answer to Question 22, we believe an approach relevant to the product as well as the expectation of the service that is being offered would be the most appropriate route to take.

23.How could a cross-sector approach interact with existing regulatory frameworks? The future of DCTs?

Oversight should be given by the most relevant regulator, in this case – the FCA. This ensures consistency with other distribution channels.

24.What future developments outlined in Chapter 9 are likely to have the greatest impact in driving engagement? If there are any important developments we have missed, what are they and why are they important?

We have chosen not to answer this question.

25.What future DCT-related technologies might affect or assist vulnerable consumers?

We have chosen not to answer this question.

Yours sincerely,

Graeme Trudgill

Executive Director, BIBA.

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Consultation – Transposition of the Insurance Distribution Directive https://www.biba.org.uk/regulation-updates/consultation-transposition-insurance-distribution-directive/ Tue, 23 May 2017 08:35:18 +0000 https://www.biba.org.uk/?p=27214 BIBA welcomes the opportunity to respond to this consultation paper. The British Insurance Brokers’ Association (BIBA) is the UK’s leading general insurance intermediary organisation representing

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BIBA welcomes the opportunity to respond to this consultation paper.

The British Insurance Brokers’ Association (BIBA) is the UK’s leading general insurance intermediary organisation representing the interests of insurance brokers, intermediaries and their customers.

BIBA membership includes just under 2,000 regulated firms, who employ more than 100,000 staff.  General insurance brokers contribute 1% of GDP to the UK economy; they arrange 54% of all general insurance and 79% of all commercial insurance business. Insurance brokers put the client’s interests first; providing advice, access to suitable insurance protection and risk management.

Within our Manifesto for 2017, BIBA called for more proportionate, fair and cost effective regulation of insurance brokers.  To this end, BIBA welcomes the application of key aspects of the Directive to the wider circle of firms involved in insurance distribution, to promote ‘a level playing field’ and  enable fairer competition.

The following provides our specific feedback on the questions raised in the consultation.

Q1. Do you agree with continuing to regulate life and liability products sold as an add-on to a non-insurance product? If not, which such products do you believe should not be regulated? 

BIBA fully supports HM Treasury’s proposal to continue regulating these products. Life and liability contracts are complex and could have a significantly detrimental impact on customers if not sold correctly.

BIBA strongly believes that the sale of any product which contains life or liability cover should be regulated, for this reason.

While liability cover might be billed as a secondary benefit under a policy (the primary being loss or damage to property), the risk to customers from the primary cover not paying out might be in the low hundreds of pounds (Sterling), but for a liability claim, it could run into the thousands (or following the changes to the Ogden tables; millions).

Q2. Do you agree to extend the existing exemption for insurance products sold as an add-on to cover ‘non-use of services’ products? If not, do you have evidence of consumer detriment which would warrant their regulation?

BIBA has no objection to the non-use of a service being included within the exemption. 

Q3. Are there complex insurance products provided as an add-on to a good or service (except those in relation to travel) that should be brought into scope of regulation? What potential is there for consumer detriment in relation to these products?

In 2013 a Financial Conduct Authority (FCA) thematic review identified significant concern with the sale of mobile ‘phone insurance, which could suggest this product may be more complex than customers expect or understand.

BIBA has also received information from one customer which we repeat below, regarding insurance on their sofa (so a connected contract and therefore exempt under the proposals):

I was told categorically by a furniture retailer that if I paid for insurance on my white Italian leather sofa, if any damage happened to the sofa including stains and marks where they couldn’t be removed by a professional, the sofa would be replaced. 

Two marks occurred on the seating area of the sofa which I can only assume were print from a magazine or dye from clothes.  I submitted a claim, a man came to remove the stains and couldn’t so he said he would arrange to have my sofa painted.  I told him that I found this unacceptable as I was told by the shop that if a mark couldn’t be removed, the sofa would be replaced. 

It appears that painting a leather sofa is the way the insurer involved resolves stain issues.  I (like many customers I imagine) would have thought twice  about taking the insurance if I had known at the outset that painting the sofa in my home was a solution to removing stains, it certainly was not how the cover was explained to me.’

These two examples highlight that mis-selling is rife in the area that is of supposedly low risk to clients and so is exempt from the consumer protection regulations to which an insurance broker must abide.

While these sales occurred outside the protected world of sales via a full time insurance broker, they still result in a detrimental impact on the reputation of and trust in the industry as a whole.  Further, this could have a knock-on consequence to consumer confidence in their future purchases of insurance, even where those sales do benefit from protection.

If HMT, like the FCA, considers micro-enterprises as equally as vulnerable as consumers; any cyber insurance cover (sold say as an add-on to a consultancy service reviewing the firm’s IT security arrangements) might be regarded as complex.

Q4. Do you agree with removing the caveat that products must have a term of less than 5 years to qualify for the connected contracts exemption? If not, which such products introduce a significant risk of consumer detriment?

Most general insurance contracts have an annual duration and those insurances linked to a long term agreement usually last for a maximum period of five years and therefore there is a limited likelihood that any arrangements will now fall within the exemption as a result of the removal of the time period.

Removing the time criterion may act as a disincentive to organisations to revisit or review products for client to ensure they remain suitable.

Q5. Do you agree with increasing the threshold for premiums below which products are eligible for the connected contracts exemption?

BIBA believes that increasing the threshold is the wrong thing to do and made this point during the development of the Directive text.

The intention behind the exemption, as BIBA understands it, was to exclude low-cost-low risk products from the scope of regulation, such as a policy to repair or replace a toaster, which cost a few pounds to purchase.  A €600 premium equates to £510 (at an exchange rate of £1:€1.18) which is a greater sum than many customers would pay for their ‘mainstay’ insurance products (such as car or home insurance).

Using publicly available data compiled by the Association of British Insurers (ABI) the average annual premium paid for a combined buildings and contents policy was £297 in Q1/2017 and for comprehensive motor insurance it was £434 in Q2/2016.

It is worth acknowledging that even low-cost products may be mis-sold and BIBA notes the existence of the redress scheme that the FCA has agreed with Express Gifts Ltd.

BIBA urges HM Treasury (HMT) to consider making use of the minimum harmonisation aspect of the directive and apply the exemption at a more restrictive sum; ideally, lower than the existing Insurance Mediation Directive limit.  

Q6. Do you agree insurance products sold as an add-on to travel products/services should continue to be regulated?

BIBA wholeheartedly supports HM Treasury’s proposal to continue regulating these products and recalls the issues that HMT found in 2009 which were of sufficient concern (with regard to consumer detriment) to warrant bringing their sale within the scope of regulation.

Travel insurance is a complex product with numerous sections covering different risks and consumers need to be adequately protected when buying it.

In the run up to HMT regulated sales of connected travel insurance, a Which? report published in July 2006 stated ‘Don’t get your travel insurance from a travel agent; it’s often expensive and they sell it badly – which could potentially leave you without cover’.

This same report also claimed that: 66% of travel agents surveyed failed to ask about medical histories (a matter that could invalidate the cover when discovered at claims stage); that 81% did not explain what the policy covered; and 100% failed to explain what was not covered.

The Holiday Travel Watch submissions to HMT at the time (details available at http://www.holidaytravelwatch.com/campaigns/political-lobbying/travel-insurance/) also highlighted specific examples of a lack of key information being disclosed to the consumer, including when asked specifically for information.

BIBA commissioned Populus in 2006 to conduct consumer research of a random sample of 500 individuals who had bought travel insurance in the previous twelve months.

The research found that more of the 500 (32%) had purchased their travel insurance from the travel agent or tour operator than any other source.

On seeking views from the 500, 97% believed that all companies selling travel insurance should be required by law to explain to customers the details of the policy that they are buying.

As relevant then as it is today; 72% of consumers who bought from a travel agent/tour operator had not been advised if terrorism cover was included or excluded.

Equally, consumers may be lulled into a false sense of security that the travel cover provided as part of a packaged back account, will provide them with sufficient cover, as the limitations and exclusions have never been highlighted to them.

In addition to ensuring customers are aware that they need to disclose pre-existing medical conditions mentioned above (and the potentially disastrous effect of not doing so), there is also a need to ensure hazardous activities are also asked about and covered if appropriate. It is not unknown for consumers to book skiing holidays and buy the travel insurance offered to them at the time, without realising that the policy has an exclusion related to winter sports.

A further concern for consumers buying through an exempt channel is that they will not benefit from the protection of the Financial Ombudsman Service or the Financial Services Compensation Scheme.

It is vital to avoid potential consumer detriment through unregulated sales of travel insurance. This can be achieved by ensuring that wherever a customer goes to buy their travel insurance, a travel agent, a bank, an insurance broker or an insurance company, that the same rules and disclosure requirements apply to the seller of the travel insurance. Therefore it is vital that the FCA continues to regulate connected travel insurance sold by travel agents and tour operators.

Q7. Do you agree that all motor warranties which are contracts of insurance should remain subject to regulation by the FCA? 

BIBA agrees and would highlight that within the FCA market study of add-on insurance products, consumers identified sales of motor related insurance products as the only area where they felt they were the target of pressure-selling.

Q8. Do you agree that firms who merely provide information in relation to insurance products or potential policyholders should no longer be regulated? If not, what risks of consumer detriment arise from these activities?

BIBA agrees with this proposal.

It is likely that many firms passing on information currently are doing so under the exemption provided by Article 72C of the Regulated Activities Order and so this change would have limited impact.

For regulated firms having a number of Introducer Appointed Representatives (IARs), the removal of introducing should reduce the administrative burden and so costs to the industry.

BIBA recognises HMT’s consideration of the risk that some firms may look to adjust their business model to try and circumvent the need to be regulated, so welcomes the intention to limit the exemption to cases where a party is doing no more than passing on the contact details.

Q9. Do you agree that where firms do more than just provide information in order to conclude an insurance contract, e.g. attempting to persuade a customer, these activities should remain in scope of regulation? How will firms be regulated? (Chapter 4)

BIBA agrees that merely introducing should be taken out of scope of regulation and would bring the general insurance into line with the exemption that exists in other financial sectors.

As HMT rightly identifies, the mere passing of an introduction is not of itself sufficient to bring about a sale and there will be at least one regulated firm involved in bringing about a sale that will have responsibility for ensuring a sale complies with the new customer’s best interest rule.

To leave introducing within scope when the IDD specifically takes the activity outside the scope of the directive, would also leave HM Treasury open to accusations of the UK ‘gold-plating’ regulations and thus putting the UK at a competitive disadvantage, when compared to our European peers.

BIBA would be grateful for confirmation that undertaking the combined activities of providing information to a client (as considered for exemption under question 8) and passing on contact details to an insurance broker (as considered for exemption under this question) would not amount to activities that would bring the introducer back into scope of regulation.

Q10. Do you have any comments on the draft statutory instrument in Annex B which set out the requirements of the appropriate UK regulator with respect to the determination of applications and in the event of it taking supervisory action?

BIBA supports the proposed amendment, for reasons that it aligns with the requirements in the Directive and it will speed up what is seen by insurance brokers as too lengthy a process currently.

The reduced timeframe should also be good for competition as it will both allow new entrants into the market sooner and the process will not act as such a deterrent.

BIBA has no concerns about the proposed amendments regarding taking supervisory action.

Q11. Do you have any comments on the draft statutory instrument in Annex B setting out amendments, required by IDD, to the processes for UK firms intending to exercise passporting rights in the EEA? 

BIBA has no comments to make in relation to this question. 

Q12. Do you have any comments on the draft statutory instrument in Annex B setting out the UK regulator’s powers to intervene with respect to an EEA firm, operating under the freedom to provide services, contravening the Directive? 

BIBA has no comments to make in relation to this question.

Q13. Do you have any comments on the draft statutory instrument in Annex B setting out the UK regulator’s powers to intervene with respect to an EEA firm, operating in the UK under the freedom of establishment, contravening the Directive?

BIBA has no comments to make in relation to this question.

Q14. Do you have any comments on the draft statutory instrument in Annex B giving the appropriate UK regulator powers to enter into Article 7 agreements with regulators in EEA member states?

BIBA has no comments to make in relation to this question. 

Q15. Do you have any comments on the draft statutory instrument in Annex B that set out the circumstances in which the appropriate UK regulator is required to publish details of any Article 7 agreements it enters into? 

BIBA supports the proposed amendment and welcomes the explicit need to consider the stability of the UK financial system when considering whether to publish anything.

Q16. The government would welcome views on this Regulatory Impact Assessment. It would be helpful to receive views on both the costs and benefits to businesses and consumers of the proposed amendments to legislation. The government would also be grateful if respondents were able to monetise, wherever possible, these costs and benefits. 

BIBA welcomes HMT’s recognition that the main beneficiaries under Policy Option 2 would be sellers of connected travel insurance and motor warranty sellers, rather than customers and it is with such sales that Both HMT and the FCA have had concerns in the past.

BIBA notes HMT’s view under ‘other non-monetised benefits’ that ‘more people may purchase insurance products in the areas where FCA regulation will no longer apply’. It could be argued that this would be the result of the removal of any consumer protection in connection with these sales and thus result in more widespread mis-selling or pressure selling.

Views on the likely impact of these amendments on small firms.

Small firms within the London insurance market that rely on trade with European customers may be most affected by these amendments.

More generally, small regional start-up firms will be affected positively by the reduction in the timeframe that the FCA has for processing applications. It is difficult to quantify the benefit as it will be dependent on the success of the new start-up, but a reasonable assumption would be to base the cost benefit on three months’ worth of turnover.

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BIBA written evidence to the Petitions Committee on the proposal to put a maximum of £1,200 on car insurance for 18-25 year olds https://www.biba.org.uk/consultations/biba-written-evidence-petitions-committee-proposal-put-maximum-1200-car-insurance-18-25-year-olds/ Thu, 02 Mar 2017 16:25:42 +0000 https://www.biba.org.uk/?p=26313 British Insurance Brokers’ Association (BIBA) agrees that the cost of motor insurance is high for young drivers. Insurance operates a system of risk based pricing

The post BIBA written evidence to the Petitions Committee on the proposal to put a maximum of £1,200 on car insurance for 18-25 year olds appeared first on British Insurance Brokers' Association.

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British Insurance Brokers’ Association (BIBA) agrees that the cost of motor insurance is high for young drivers. Insurance operates a system of risk based pricing – where the premium reflects the risk of the client. With young drivers there is a far higher frequency and severity of claims being made (than for other age groups), backed up by insurer claims statistics. The Association of British Insurers advise that 17-20 year old male drivers are nearly ten times more likely to be killed or seriously injured on the roads than more experienced drivers and the crash risk for young drivers rises threefold when carrying three or more passengers.

Young drivers make up just 12% of licence holders but they are involved in 25% of road deaths and serious accidents, which tend to be more expensive in terms of claims. Ultimately the increased risk means that young drivers between the ages of 17-20 are twice as likely to make an insurance claim as other drivers and, on average, their claim costs will be three times higher.

 

The proposal for Government intervention in pricing (by capping the premium at £1,200) is not one that BIBA supports. Risk based pricing acts as a risk management tool, ensuring drivers are incentivised to take care to drive safely and within the law and are rewarded with lower premiums. Also, the real cost of young driver claims would have to be passed on to other motorists through increased pricing, which is not fair and is against the system of risk based pricing.

Currently, as drivers reach different age bands they begin to benefit from lower risk pricing. This means that every driver ends up paying for the same age related factors over time.

 

However, there are a number of ideas BIBA would like to propose that could help reduce the insurance cost for young drivers while at the same time improve safety and also save money in the long run for the Government.

 

Instead of a cap, BIBA would like to propose an eight point plan to enable young drivers to access more affordable motor insurance.

1. For Government to reduce the rate of insurance premium tax (IPT) to zero for young drivers using telematics based policies, acting as an incentive for greater take-up of these policies which deliver significantly improved road safety results, leading to lower premiums.

Studies from BIBA brokers show that for new young drivers, telematics policies can halve a drivers risk of crashing in the first year. Others results show safety increasing three fold in their first 6 months since passing their test.
It is BIBA’s view that applying a zero rate of IPT is a win for everyone, it would make roads safer by moderating young driver behaviour, provide cheaper premiums for young drivers and be cost neutral for Government.

We also believe the doubling of insurance premium tax from 6% to 12% in the last 18 months has a significant effect on young driver premiums increasing the average tax they pay for a £1,500 policy from £90 to £180.

  1. Improvements to the driving test should include learnings from speed awareness courses, to ensure new drivers are safer before they venture on to the road after passing their test, resulting in fewer incidents in the months after the examination which would lead to cheaper premiums. This is supported by Northumbria Police.
  2. For greater promotion of safety measures in vehicles utilising advanced driver assistance systems (ADAS) technology including autonomous emergency braking (these result in a lower vehicle rating group for the car and therefore lower insurance premiums).
  3. For the forthcoming new Single Financial Guidance body (that will replace the Money Advice Service) to utilise the BIBA Find-A-Broker service in order to match young drivers with specialist young driver brokers giving discounts for various risk management features including dash-cams and telematics.

 

  1. For greater promotion and recognition, VAT breaks and even sponsorship of post-test advanced driving courses for young drivers, that are now more beneficial than the old pass plus system.
  2. For Government to implement the necessary legal and regulatory reforms to reduce the £2billion cost of whiplash claims as per the Prison and Courts bill.

 

  1. For Government to consider the disproportionate affect that a reduction in the discount rate for catastrophic injury claims would have on insurance premiums for young drivers and change the model.

 

  1. To implement all 26 recommendations of the Insurance Fraud taskforce.


Further details on these eight points:

 

  1. For Government to reduce the rate of insurance premium tax (IPT) for young drivers using telematics based policies to zero, acting as an incentive for greater take-up of these policies which deliver significant improved road safety results and result in lower premiums.

 

1.1 Young drivers can take greater control over their own premiums by considering a ‘pay as you drive‘ telematics policy. There are three main types of telematics policy:

 

  • A mileage based policy – where the premium is calculated according to mileage.
  • A time based policy effectively with a curfew because the cost of driving at night is much more expensive than during the day and this is tracked by the device.
  • A driving behaviour/ lifestyle type policy, where many elements are considered in the rating – speed, acceleration, braking force, mileage even familiarity with route.

 

1.2 The barriers to telematics policies are reducing. The cost to buy and fit the box are much lower than when initially launched and the Insurance provider usually picks up these costs.

Drivers (and the parents of young drivers) consider the telematics box more of a positive ‘co-pilot’, than a negative ‘spy in the car’, as the ability to check your driving by looking at a ‘driving dashboard’ on-line or via a mobile phone ‘app’ informs them of the results of their driving, providing great feedback to encourage improved driving.
1.3 BIBA conducts annual research into the number of telematics policies live in the UK and in 2016 the number exceeded three quarters of a million for the first time as of December 2016 . BIBA member ingenie, advises that telematics insurance makes a huge difference to the safety of a young driver, particularly when coupled with effective feedback and education for the driver, they advise that telematics is a better option financially, and drivers are willing to drive more safely to reduce crashes, so much so that Telematics policies can offer savings of up to 25% for careful drivers. Data provided by the ‘black-box’ technology builds a personalised risk profile based on an individual’s actual driving.  Ongoing monitoring of driving behaviours encourages better, safer road use. Research from insurance provider ingenie shows that telematics-based feedback can halve a driver’s risk of crashing during their first policy year.
1.4 In addition, BIBA member Marmalade, specialists in telematics insurance for young drivers, has seen exceptionally strong safety results. Studies show that one in five young drivers have an accident within the first six months of passing their test. Yet with Marmalade that figure significantly improves to only 1 in 16, making their young drivers three times safer (based on Marmalade policies incepted April 2015 – March 2016. 1 in 16 Marmalade drivers have an accident within six months of their policy start date, compared with one in five young drivers who have an accident in the first six months after passing their test, according to National Statistics).

1.5 Insurance premium tax (IPT) forms a significant part of the motor insurance premium – and is set to increase to 12% in June 2017.  We believe that removing IPT from telematics based insurance for young drivers would encourage the take up of this type of policy which, in turn, because of the accident reduction effect, improves road safety.  The ‘Making Road Safety Pay’ report from Ageas, Ingenie and the Road Safety Foundation calculated that this change would be cost neutral to Government during five years due to the reduction in the number of serious accidents, but massively increases road safety.

1.6 The business case from January 2016 states: “Removing IPT on telematics products would increase take up and promote safer driving among young people. It would reduce the number of serious road crashes – which cost the economy an average £400,000 each according to the Department for Transport. As IPT is due to be levied at 12% for motor insurance policies and the average telematics policy costs around £1,000 per annum, research shows scrapping IPT for under 25s would be cost neutral over seven years resulting in safer roads and cheaper motor premiums for young drivers at no cost to Government. This is a modern solution that is available now for the Government to implement. BIBA and Ageas strongly believe this is the right course of action.”

1.7 In our 2017 Manifesto BIBA calls on Government to remove IPT from these policies, this step would help meet the Department for Transport road safety statement of December 2015 which stated that “telematics offered a potential blueprint for a new targeted casualty reduction initiative.”

1.8 BIBA’s view is shared by Francois Xavier-Boisseau, CEO of motor insurer Ageas Insurance, who advises “Young drivers in the UK are far too likely to be killed or seriously injured on our roads and pose a significant danger to other road users. Increasing the uptake of telematics by the under 25s would help to encourage and incentivise them to drive more safely. If the Government removed insurance premium tax for telematics products it could boost demand and is a clear, simple action that could be implemented quickly.”

1.9 It is BIBA’s view that telematics policies are a win for everyone, applying a zero rate of IPT would make roads safer, provide cheaper premiums for young drivers and ultimately provide savings for Government.

Telematics Policies

2009 – 12,000 live policies
2010 – 35,000 live policies
2011 – 100,000 live policies
2012 – 180,000 live policies
2013 – 296,000 live policies
2015 – 323,000 live policies
2016 – 455,000 live policies
2017 – 751,000 live policies

  1. Improvements to the driving test, including the learnings from speed awareness courses to actually be provided within the driving test to ensure new drivers are safer before they pass their test and venture on to the road, resulting in fewer incidents in the months after the examination also leading which would lead to cheaper premiums.

 

2.1 BIBA responded to the Government consultation ‘DVSA Improving the car driving test’ which asked for comments on the proposal to increase the independent driving section in the test from 10 to 20 minutes.
2.2 BIBA’s response was that increasing the driving element gives the instructor more time to observe behaviours; however, the classroom element of the test should be a very important part of the process of learning to drive.

Results from Northumbria Police prove that classroom training for speed awareness courses improves awareness of road safety issues, with 78% of drivers who attended saying they are more likely to keep to the speed limit and 91% learning something new.
2.3 96% said these courses should be offered to more drivers to make roads safer. BIBA and its Motor Panel, which includes AA Insurance Services, the organisation with enormous experience of providing driver education courses on behalf of the Police as well as driving schools, believe improving access to road safety education will dramatically improve the preparedness and ultimate safety of young drivers. These drivers are currently the highest risk element of the driving community, with more than five times the propensity to be involved in an accident than an over 35-year-old driver.
2.4 Therefore, BIBA believes that the learning provided in these types of courses should be provided to learner drivers to help prevent speeding, therefore reducing the number of accidents on the roads. The driving test provides an obvious opportunity for this to be monitored. Insurance premiums are risk based, therefore young drivers often have the highest premiums because of their increased incident rate and the severity of these incidents is much higher. Another benefit of this approach may be lower insurance premiums for this age group as a result of their improved risk profile.
2.5 Fewer accidents will mean the risk profile of young drivers would lessen, enabling the insurance industry to reflect this in its terms and premiums.

 

  1. For greater promotion of safety measures in vehicles including autonomous emergency braking (these result in a lower vehicle rating group for the car and lower insurance premiums based on the vehicle).

 

3.1 Thatcham research describe Autonomous Emergency Braking (AEB) as a safety technology that takes into account the traffic conditions ahead and will automatically brake the car if the driver fails to respond to the conditions. It is probably the most significant development in car safety since the seat belt and could save 1,100 lives and 122,860 casualties in the UK over the next ten years. So, rather than protect the driver using the seatbelt and airbag in a crash situation, AEB aims to prevent the crash in the first place.

3.2 BIBA believes this is one of the most significant safety developments in motoring. Research shows that 75% of all collisions occur at speeds of less than 25mph in so called ‘City’ driving environments.  AEB leads to a 38% reduction in real-world rear-end crashes’ concluded a 2015 study by Euro NCAP and Australasian NCAP. Third party injury claims on the Golf VII (with AEB) were 45% lower than its equivalent in analysis of UK insurance data. Cars fitted with AEB as standard can benefit from an insurance vehicle group that is 3 or 4 groups lower, leading to cheaper premiums.

 

3.3 ADAS safety measures include Lane assist, which warns the driver if they drift over the lane markings on a road (often when they lose concentration). Parking assist helps to prevent low speed parking incidents often involving pedestrians. Greater promotion and affordability of these systems would reduce the risk for new and inexperienced drivers and ultimately lead to lower premiums.


  1. For the forthcoming new single financial guidance body (that will replace the Money Advice Service) to the Find-A-Broker service to match young drivers with brokers that specialist young driver brokers or with telematics brokers or brokers that give discounts for various risk management features including dashcams.

4.1 Young drivers may simply try a comparison site or their bank when seeking their insurance, however as per the Government’s response to this petition, BIBA would like to remind Government of our Find-A-Broker service, which can match young drivers to many relevant products from specialist brokers or with brokers with telematics solutions as well as brokers that give discounts for various risk management features including dashcams. Our response to HM Treasury’s recent consultation on the ‘Public Financial Guidance Review: consultation on a single body’ offers BIBA’s assistance in utilising our Find-A-Broker service to assist young drivers accessing insurance.

 

  1. For greater promotion and recognition, VAT breaks and even sponsorship of post-test advanced driving courses for young drivers.

 

5.1 There are numerous post-test advanced driving courses – pass plus being one that is probably the most recognised. However pass plus is no longer considered particularly successful.

 

5.2 More modern interactive courses exist that extend road safety techniques to the driver, by providing vital information on accident avoidance while in the car. This enables drivers to learn techniques to safely deal with potential accident situations that may occur. For example, organisations like Ultimate Car Control offer courses to young drivers as well as fleet drivers, these only use advanced driving instructors and deliver the knowledge in a way which provides strong retention values to the student. Many employees are required to take these courses and benefit greatly from them. If Government was to give greater promotion to these safety themed courses along with any form of VAT break, they would be more affordable for young drivers and increased participation would increase road safety and reduce premiums. These courses are also far more appealing to young drivers then a pass plus course.

 

  1. For Government to implement the necessary legal and regulatory reforms to reduce the £2billion cost of whiplash claims.

 

6.1 Despite the fact that during the last 15 years road traffic accidents have reduced by 39%, personal injury claims (largely whiplash) have increased by 90%. These are fuelled by over 720 million nuisance calls and texts in the last year alone. There was also a 150% increase in aged claims more than 300 days old since 2011. Also, in France three percent of personal injury claims caused by a motor claim are whiplash claims, however in the UK an incredible 80% of these are whiplash claims. It is estimated by Government that if their 2015 Autumn statement reforms in this area were implemented they would reduce customers premiums by an average of £43 and insurers like Aviva have pledged to pass on 100% of the savings.

 

6.2 This is why BIBA is calling for:

  • Government to bring forward the necessary legislation to begin the new regime of Financial Conduct Authority regulation of claims management companies as soon as possible.
  • Government to restrict the period that claims can be brought in from three years to one year, this would allow people who are genuinely injured to make claims, while reducing the ability of ‘claims farmers’ to trawl for business.
  • To cap the amount payable for whiplash claims from occupants of a car
  • To increase the small claims track limit to £5,000 for the occupants of a motor vehicle.

 

  1. For Government to consider the disproportionate affect that a reduction in the discount rate for catastrophic injury claims would have on insurance premiums for young drivers

 

7.1 The Discount Rate is used in calculating settlements in catastrophic personal injury claims to ensure that the claimant is neither over nor under compensated.

7.2 The Discount Rate is applied by insurers to make a settlement based on an allowance for the return that a claimant might expect to receive if a lump sum compensation award is invested prudently.  Government index-linked gilts are used to determine the rate applied.

7.3 The Discount Rate was set at 2.5% in 2001 and has not been revised despite change in economic conditions, reduced interest rates and despite two Government consultations on the matter.

7.4 The Ministry of Justice (MOJ) recently announced a review and expects to announce the new rate by the end of February 2017.  The Association of British Insurers (ABI) sought to bring a Judicial Review, calling on a the Government to complete its consultation before announcing the new rate, but this proved to be unsuccessful and the ABI were refused a right of appeal.

7.5 There is much speculation as to how much the revised Discount Rate will be reduced by, with some observers even suggesting that a negative discount rate is justified taking into account the changes in investment returns, tax rates and inflation since 2001.

7.6 Any reduction in the rate will result in higher claims awards and therefore have a significant impact on insurers’ balance sheets, with some suggestion that it will cost the insurance industry billions of pounds.

7.7 This will, inevitably, mean significant premium increases in motor and liability insurance classes, particularly in sectors such as young drivers and commercial motor.

7.8 Many insurers have been strengthening their reserves and seeking more capital, however some commentators suggest that this has the possibility to see insurers exiting the insurance the motor and liability markets where they are unable to deal with the impact of any change in the Discount Rate. BIBA call for avoidance of any significant changes to the discount rate.

  1. On 26th May 2016 a statement regarding the Insurance Fraud task Force from the Economic Secretary to the Treasury announced the Government accepts each of the recommendations addressed to it. These recommendations included:

  • Government to review ways in which fraudulent late claims can be discouraged through changes to court costs and evidence rules such as;
  • directing older claims to the small claims process  not the fast track process,
  • reducing recoverable costs by 50% if an injury claim is notified late, and
  • Introducing a damages award range for soft tissue injuries.
  • Demanding that the Solicitor’s’ Regulation Authority (SRA) be tougher on fraud by working with the Claims Management Companies’ (CMC) regulator to properly and strongly enforce referral fee bans. In addition, to ensure that organisations not currently regulated are brought into the regime.
  • The Taskforce also calls on Government to develop and deliver a coherent regulatory strategy to clamp down nuisance calls and texts to reduce the number of honest customers being coerced into making spurious claims.

8.1 Due to financial constraints on Government, their ability to implement the recommendations has been hampered and therefore we call on Government to direct resources to this important initiative which will benefit consumers and young drivers please see Annex A for recommendations.

We hope you find our eight recommendations helpful, we believe that if they were all implemented UK roads would be significantly safer and also young drivers would benefit from significantly cheaper premiums.

Yours Sincerely,

Graeme Trudgill FCII
Executive Director

Direct Tel:  020 7397 0218
Email: trudgillg@biba.org.uk

Annex A

 

List of Taskforce recommendations

1 To improve consumer understanding of insurance products, the insurance industry should
· be more mindful of policy and other documentation following the FCA discussion paper on ‘Smarter Consumer Communications’. Good practice on this topic should be coordinated by the ABI · increase promotion of the CII’s ‘Made Simple’ service
· roll out the ABI and BIBA’s ‘Code of Good Practice’ to help insurers and insurance brokers recognise and help potentially vulnerable customers1

2 To ensure anti-fraud messaging is targeted and hard-hitting
· The ABI, IFB and IFED should oversee the development of a long-term, crossindustry public communications strategy. This should include increased promotion of IFB’s ‘Cheatline’, highlighting the impact of fraud on honest policyholders, use of the media and trusted intermediaries and communication channels outside of the insurance industry.
· The ABI and CII should commission research on behavioural economics. The research should be available to all and the ABI should encourage take up of the conclusions through its voluntary best practice guidance

3 The insurance industry should strive to improve the quality and quantity of data available in fraud databases and data sharing schemes, including by
· following the standard definition of insurance fraud produced by the ABI and the ABI should encourage members to participate in its annual fraud statistics benchmarking exercise
· ensuring that the data available is accurate. Insurance Database Services Limited (IDSL) should allow the public to check their own claims histories through CUE free of charge, and challenge inaccurate records. There should be a free and accessible checking and appeal process for all databases used in the application and claims processes
· increasing membership of existing anti-fraud scheme and databases including MyLicence and CUE

4 In light of forthcoming EU regulations,2 the ICO should provide the insurance industry and others with clear guidance on data sharing practices in relation to insurance fraud

5 The ABI should develop and promote voluntary ‘best practice’ guidance based on what the most effective firms are doing to tackle fraud, including a short ‘checklist’ on measures all insurers can take to improve their counter fraud defence

6 Insurers should ensure Board level ownership of counter fraud activity 1 Accessed January 2016; https://www.abi.org.uk/News/News-releases/2016/01/ABI-and-BIBA-launch-industry-Code-of-Good-Practice-to-helpvulnerable-customers 2 General Data Protection Regulation (GDPR) 78

7 The ABI should consider how it resources its counter fraud activity and whether more priority should be given to this task

8 The ABI should discourage the inappropriate use of pre-medical offers

9 The insurance industry as a whole should consider following the established good practice of some insurers in defending court proceedings where they believe the claim is fraudulent

10 The government should review how fraudulent late claims can be discouraged through changes to court, cost and evidence rules considering options including
· recent claims (e.g. within 6 months) proceeding as normal through the fast track, but older claims being dealt with in the small claims track (SCT)
· reducing recoverable costs by 50% if a minor personal injury claim is notified six months after the accident
· introducing a system of predictable damages for soft tissue injuries
· introducing a rebuttable evidential presumption that no injury was suffered where claims are lodged after a specified period of time has elapsed since the alleged accident3

11 The insurance industry should remain vigilant to emerging fraud and should coordinate its engagement with government through the ABI

12 The insurance industry should support the development work needed to evolve the IFB into a holistic intelligence hub and ensure timely contribution to the evolved dataset

13 The Claims Portal Limited should give IFB access to Claims Portal data

14 The government should
· consider strengthening the fining powers of the SRA for fraudulent or corrupt activity
· consider reviewing the standard of proof used in cases put before the Solicitors Disciplinary Tribunal 15 The SRA should take a tougher approach to combatting fraud including by
· making clear that it will give an appropriate focus to combating financial crime through its existing powers, including naming and shaming
· considering requiring solicitors to undertake client identification checks in cases other than just those where they handle client money
· working with the CMR Unit to enforce the referral fee ban

16 Insurers should provide the SRA with evidence regarding claimant law firms suspected of insurance fraud and the SRA should investigate and act robustly. The IFB should act as a single point of contact between insurers and the SRA

17 In implementing the whiplash reforms outlined at Autumn Statement 2015, the government should consult on introducing a mandatory requirement for referral sources to be included on CNFs and claims should only proceed where CNFs are complete. 3 For example if a soft tissue injury claim was made over 1 year from when the accident occurred it is to be presumed that no injury was suffered unless the claimant can provide contemporary evidence such as GP notes or A&E visit, or time off work 79 Insurers should share data with the SRA and CMR if they suspect claimant representatives of breaching the referral fee ban
18 The ABI, in conjunction with the IFB, should produce guidance to its members setting out what forms of direct contact is acceptable with the alleged claimant if they suspect that legal representatives are acting without instruction

19 Claimant and defendant representatives (APIL, MASS, FOIL and ABI) should produce a standard letter in conjunction with the SRA and IFB for insurers to send to claimants directly to verify whether they have instructed a firm to represent them

20 The government should establish a stronger regime for CMC regulation and ensure that it has adequate resources and powers to do its job effectively. In particular the regulator should
· effectively police the referral fee ban
· prevent the use of “phoenix” companies
· consider how to deal with those organisations providing claims management services outside the regulated sector
· liaise with the ICO regarding the abuse of data protection rules
· maintain a robust regime to ensure those regulated are run by fit and proper persons 21 The government should
· develop and deliver a coherent regulatory strategy to tackle nuisance calls that encourage fraudulent personal injury or other claims, in partnership with the CMR, IFB, ICO, ABI, Ofcom and SRA
· put the ICO’s Direct Marketing Guidance on a statutory footing 22 The ICO should
· work with regulators operating in countries where nuisance calls are commonly sourced to tackle nuisance calls internationally
· coordinate a communications strategy to inform consumers what giving consent to use of their data means in practice

23 The government should consider introducing a fixed recoverable costs regime for noise induced hearing loss (NIHL) claims The Taskforce endorses and supports the CJC’s investigation into how a fixed recoverable costs regime for NIHL cases (and perhaps other similar cases) might work, and how the handling of NIHL claims might be improved by both claimant and defendant representatives (including how evidence is obtained and presented), and recommends that this work should include consideration of quality standards and/or other thresholds for medical evidence

24 Aggregators should establish the use of existing fraud databases and data sharing schemes on a consistent basis in order to improve the industry’s ability to detect fraud at the point of quote 80

25 Aggregators should proactively engage with insurers and come to a collective data sharing agreement to tackle insurance fraud in order to detect suspicious consumer behaviour at the point of quote. This initiative should be coordinated by the IFB

26 The government should establish a legacy vehicle to ensure that Taskforce recommendations are implemented The legacy vehicle should continue the effective dialogue between different stakeholders regarding insurance fraud and should be made up of industry representatives similar to that of the Taskforce. It should review progress against these recommendations and fraud developments generally and should report to government once a year initially for 3 years. It should produce an annual report to government on progress and areas that need to be improved.

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BIBA responds to Money Advice Service – Public financial guidance review: consultation on a single body https://www.biba.org.uk/consultations/biba-responds-money-advice-service-public-financial-guidance-review-consultation-single-body/ Mon, 13 Feb 2017 16:44:16 +0000 https://www.biba.org.uk/?p=26226 Public financial guidance review: consultation on a single body The British Insurance Brokers’ Association (BIBA) is the UK’s leading general insurance intermediary organisation representing the

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Public financial guidance review: consultation on a single body

The British Insurance Brokers’ Association (BIBA) is the UK’s leading general insurance intermediary organisation representing the interests of insurance brokers, intermediaries and their customers.

BIBA membership includes just under 2,000 regulated firms, employing more than 100,000 staff.  General insurance brokers contribute 1% of GDP to the UK economy, they arrange 52% of all general insurance and 78% of all commercial insurance business. Insurance brokers put their customers’ interests first, providing advice, access to suitable insurance protection and risk management. BIBA is a not-for-profit organisation.

We welcome the opportunity to respond and our answers to the 11 questions are set out below.

Q1. Do people with protected characteristics under the Equalities Act 2010, or any consumers in vulnerable circumstances, have particular needs for public financial guidance or difficulty finding and obtaining that guidance?

BIBA recognises the logic in the argument that people with protected characteristics may have a particular need for financial guidance and this will include in the area of general insurance. General insurance customers come from all of the areas covered under the protected characteristics of the Equality Act. So if an older customer seeking motor insurance or a disabled customer seeking travel insurance were to contact the new single financial guidance body (SFGB), it is imperative that the SFGB signpost the customer to  someone who can help them meet their needs. This is why BIBA is extremely concerned that despite the new SFGB being the formal statutory single financial guidance body there is not one single mention of the word insurance in the consultation, yet there are 106 mentions of the word pension.  Insurance is a necessary and sometimes compulsory purchase for the majority of people in the UK and having no or inappropriate insurance can have devastating consequences.

As solely FCA regulated insurance intermediaries are required by law to make a financial contribution to pay for the running of the SFGB, currently totalling around £600,000 a year,  our members would expect the SFGB to also provide a reasonable service for general insurance customers with protected characteristics, for that expenditure. Alternatively general insurance intermediaries should not be made to pay towards the running of the new SFGB.

BIBA and the Association of British Insurers has published a joint voluntary Code of Good Practice regarding support for potentially vulnerable motor and household customers at renewal, so our members are well placed to assist customers with protected characteristics.

We note the point made in section 3.23 of the consultation which states:

Currently, the funding delivered to MAS, TPAS and Pension Wise is ring-fenced for debt advice, money guidance and pension’s guidance. The Government thinks it is important that levy payers see their contributions fund activities of direct benefit to their organisation”.

We agree with this position that we have highlighted above in bold and would request that the Government ensure that the SFGB also help general insurance customers via its website, webchat and telephone contact centre, incorporating the existing content. BIBA would suggest that information the SFGB supplies to consumers via its website or otherwise, includes reference to BIBA’s Find-A-Broker service and the general insurance guidance pages that currently exist on the BIBA website.

In addition, we understand that the money advisers at the existing telephone contact centre receive training specifically about issues relating to general insurance and how to signpost people (and when) to the Find-A-Broker service. BIBA’s Find-A-Broker service already handles enquiries from over 250,000 general insurance customers every year, some of whom are signposted from the Money Advice Service and we are keen to continue to support these customers.

Q2. Do you agree that these areas capture what the broad role of the SFGB should cover?

We agree with the point made in 2.1 that consumers would benefit from a single source of Government backed, free-to-client financial guidance.

We believe free financial advice to consumers is important in helping them make the right decision(s).  This aligns well with the insurance broker model; insurance brokers generally work on a commission basis so all the advice they provide while the client is searching for suitable cover comes free of charge. Only when the client purchases a policy via the broker does the broker earn any income.

BIBA also agrees with section 2.4 where the Government propose that “the SFGB should complement the services provided by other organisations”.  We believe SFGB should work with the insurance broking sector to help people get the information and appropriate guidance that they need on insurance matters either directly from SFGB or from other high quality sources. We believe that our members are well placed to assist the Government in this area.

We do not disagree with the five areas that SFGB will deliver or commission services for. We believe the fourth bullet point in section 2.6 “the provision of information for people on wider money matters and co-ordinating and influencing efforts to improve financial capability” is a very broad role and we invite the SFGB to work on this with BIBA. This could include helping consumers navigate the general insurance market, find insurance solutions when they are declined, and understand what steps they might be able to take to keep their premiums as low as possible.

It is relevant to mention here that the National Literacy Trust advises that around 16 per cent, or 5.2 million adults in England, can be described as “functionally illiterate”. They would not pass an English GCSE and have literacy levels at or below those expected of an 11-year-old. This is where our members, who are by law ‘agent of the client’, can assist in providing suitable advice and support in seeking and placing a relevant and competitive insurance policy.

Q3. Do you agree that the SFGB’s financial capability initiatives should focus on priority groups such as those who are most in need of support to build resilience?

Yes, financial capability remains an issue, which in the insurance space, results in significant numbers that are uninsured.  There remain around 1 million uninsured vehicles in the UK. The number of claims into the Motor Insurers Bureau Guarantee Fund in 2015 increased by 10.4% above 2014 levels, demonstrating a worsening situation. Concerns also exist in travel, home and pet insurance where customers buy minimal levels of cover on comparison sites that prove to be insufficient when it comes to making a claim. Consumers who are ‘just about managing’ have also been hit by the three successive increases in Insurance Premium Tax, and the insurance industry is reporting to us that people are now less able to afford the increases in premiums.

We believe that the SFGB initiatives should include the value of insurance; the key ‘must haves’ in terms of cover; and advice on the benefits of using an insurance  broker, which will  help consumers to comply with the law and successfully transfer the risk of financial loss.

Q4. Do you agree that the SFGB should have a strategic role, working with the financial services and pensions industry and third sector organisations to improve financial capability?

Yes, there is a responsibility on the SFGB to have a strategic role to improve financial capability as it becomes a focal point for enquiries and the SFGB is invited to work with our sector (insurance broking) to help it achieve its objectives.

Q5. How might the SFGB develop its understanding of what works and usefully contribute to sector wide research?

Digital inclusion for older people is an issue that we believe will need to be addressed; we refer you to our previous consultation response where we highlighted that 3.8million UK households are without any internet and 12 million people living in rural or remote areas of the UK have poor internet access. There are also two additional suggested areas to consider. First is to analyse the complaints received by the Financial Ombudsman Service and focus research resources into why the upheld rate is high in some sectors and look at how to deal with that. Secondly, we can advise the key searches for insurance on our Find-A-Broker system are for:

– motor: ages 17-24
– motor: general insurance (25-75)
– home buildings/contents
– building/contents unoccupied properties,
– buildings/contents, undergoing renovation
– buildings/contents; flood zone
– buildings/contents, subsidence
– general house insurance
– travel, general
– travel; medical conditions
– travel up to 85 years old

Therefore additional research from SFGB in these areas that could result in promoting these issues and relevant solutions for them would be useful.

Q6. In what ways could the SFGB co-ordinate and add value to the provision of financial education?

 

The education system does little to assist in the provision of financial education, for example the legal requirement to buy motor insurance is not taught in school, nor are any of the principles of insurance. We appreciate it is a significant  challenge to change curriculums, however if a series of simple one-page documents could be produced jointly between BIBA and the SFGB on insurance, BIBA would be willing to help in promoting these to young people at every opportunity through relevant channels and media opportunities.

Q7. Are there other delivery channels that the SFGB should consider that would be effective for delivering to consumers?

Telephony, webchat, website and face-to-face are all relevant.

We note that a previous MAS face-to-face service was discontinued but that section 3.2 states ‘the provision of some face-to-face support’. We would like to point out that in membership we have FCA regulated insurance brokers placed in 2,639 offices all around the UK who can be accessed through our Find-A-Broker service. This service already helps over 250,000 general insurance customers to access insurance every year. This is underpinned by an existing, formal agreement on age and insurance with HM Government that aims to help improve consumer’s outcomes for older people and has the Find-A-Broker service at its heart.

The Find-A-Broker service is accessed by either calling a local-rate telephone number, or via our website, (biba.org.uk). If a customer telephones the service, our trained and FCA registered call centre takes key details of the risk and based on the information ascertained contacts an insurance broker most likely to be able to find insurance for the caller.

More often than not, queries to our Find-A-Broker service relate to gaps in financial guidance, where customers with unusual or non-standard risks have been unsuccessful in finding suitable insurance solutions in the general insurance market. This is often because in the course of automated sales they find that ‘the computer says no’ – this very concern was raised in the May 2016 FCA Occasional paper 17 as a barrier that can exist for consumers trying to access financial services in the UK.

As well as providing cover for standard general insurances, specialist insurance brokers better understand the complexities of the cover required for non-standard risks and use their experience to better present the risk to an underwriter. This often means that cover can be found where it was previously not available, or purchased on better terms than by a customer approaching a company direct or through a price comparison website.

Therefore, we would like to formally suggest a new agreement with HM Government that builds on the existing and successful Find-A-Broker service to ensure that as many people as possible can access suitable general insurance products. Such a development would help the new SFGB meet its objective mentioned in section 3.5 “the Government expects that the SFGB will generally provide signposting or handoffs for consumers in need of broader guidance on financial matters, or financial advice”.

The agreement with Government: ‘Transparency and access in motor and travel insurance for older people – An agreement on age and insurance’, commonly referred to as the Age Signposting Agreement, started in April 2012. This agreement requires insurers (as a condition of ABI Membership) to signpost elderly motorists or holiday makers who have been declined motor or travel insurance due to their older age, to a suitable provider. BIBA is the recognised trade association that has already helped more than 275,000 older customer access insurance in the last 4 years. The formal terms of this contract are specified in Annex A.

Q8. How should the SFGB ensure that it engages consumers at the right time for them?

The right time to engage with consumers is prior to them starting to obtain quotes for their general insurance, at which point they need to: understand what exposures they need cover for; what limits they require; what amounts they can self-insure (the excess); how to access the relevant products; how to access premium finance; etc. In all these areas an FCA regulated insurance broker offer advice and discuss their demands and needs.  A good example is in pet insurance often regarded as a simple to arrange insurance but does the pet owner want to buy ‘lifetime’ cover, ‘per condition’ cover or ‘time limited’ cover? Do they realise that some covers are for accident only. It is essential that consumers understand the variations in cover and do not simply purchase an accident only policy which would not cover vet fees if the pet contracted a medical condition.

We would suggest the MAS work with BIBA to ensure guidance is available to consumers and a targeted approach taken to raise awareness.

Q9. Do you agree that the SFGB should be able to exercise some flexibility in the way funding is directed?

Yes, a degree of flexibility in the way funding is important. We would like to reiterate there are no mentions of insurance in this consultation and 106 mentions of pensions. It is vital that general insurance – a product purchased by the majority of families in the UK has sufficient exposure in the new SFGB representing the funding that the general insurance industry paid into it.

The overall industry levy for MAS in 2016/17 was £27.6 million, the general insurance intermediation class paid £0.6 million of that and we agree with the Government’s view that: “it is important that levy payers see their contributions fund activities of direct benefit to their organisation”. BIBA would like to take the opportunity to request funding (if available) for our Find-A-Broker service that helps over 250,000 people a year.

Q10. Would these proposals have any impact on the delivery of public financial guidance in Scotland, Wales or Northern Ireland?

We think it is important that consumers in Wales, Northern Ireland, Scotland and England continue to have access to the information provided by the Money Advice Service website but specific needs of the devolved administrations be considered. BIBA has members in all these regions who are able to support consumers.

Q11. Do you have any other comments about the proposed delivery model and consumer offer?

Given that the general insurance sector has been making an investment into MAS it is disappointing that the service appeared to attract very little interest from general insurance consumers. We hope that the new SFGB will provide a better return on investment and ensure more general insurance customers are able to access guidance, including on all relevant issues around financial capability and to help customers (particularly those just about managing) to understand their insurance risks and make informed choices. Alternatively, general insurance intermediaries should not be forced to pay towards this levy.

Finally, we understand MAS received many internet enquiries through an investment in SEO and we would request that the new SFGB ensure this considerable SEO traffic is not lost.

I hope you find this response helpful and will give serious consideration to our offer of the new SFGB working closely with BIBA and our Find-A-Broker service. If you would like to discuss our response in more detail we would be delighted to meet and develop our ideas.

Yours faithfully

Graeme Trudgill FCII,
Chartered Insurance Practitioner
Executive Director
0207 397 0218

 

 

 

 

 

 

Annex A – Signposting Agreement formal terms

https://www.abi.org.uk/~/media/Files/Documents/Publications/Public/2016/Age%20and%20Insurance/Agreement%20on%20Age%20and%20Insurance.pdf


Access to motor and travel insurance Proposals under the Equality Act 2010 do not prohibit insurers’ use of age limits, although the Government, the ABI and BIBA recognise that some older customers do not always know how to find and obtain motor and travel insurance. Improving access for older people This Agreement addresses concerns about access to motor and travel insurance for older people through non-statutory provisions.

General principles This section sets out the circumstances in which regulated entities using maximum age limits for motor and travel insurance will comply with this voluntary agreement. They will refer people aged above that maximum limit to a provider or suitable signposting service that can meet their needs.

This means: · Where a member of the ABI is the sole regulated entity with responsibility for the sale of a contract, that insurance company will undertake to comply with the Agreement.
· Where a member of the ABI is not the sole regulated entity, and an intermediary has responsibility for the sale of a contract, the ABI will request those intermediaries comply with this Agreement through their terms of business with the ABI member.
· Where a member of BIBA is the regulated entity with responsibility for the sale of a contract, that broker will undertake to comply with the Agreement.
· Where a contract is marketed and/or sold by regulated entities that are not members of the ABI or BIBA those companies will be invited to participate in this Agreement.

Referral arrangements This section sets out the criteria and standards that age-based referral arrangements should fulfil and the form in which referral arrangements should be framed where insurance companies who use maximum age limits refer customers to another provider. In all cases the following criteria should be satisfied:

· That the customer is clearly informed that a product is not available because of their age, or the age of another named person covered by the policy.
· That the customer is clearly informed that cover for people of their age is available through referral to a partner or signposting service.
· That contact details of the partner or signposting service have been clearly stated. Transparency and Access in Motor and Travel Insurance 7 7
· That permission is sought and granted before customer details have been transferred to a third party. Where insurance companies use maximum age limits, suitable arrangements to refer customers to another provider may adopt one of the approaches below.
· Referring customers to another provider through a contractual or noncontractual arrangement with a provider who would be willing to offer insurance to people of that age.
· Signposting customers to another provider through a service that holds information about one or more providers who would be willing to offer insurance to people of that age. A suitable signposting service would be required to publish aggregated data on the number of enquiries as set out in this agreement.

Examples of good practice can be found in the ABI’s guide for insurers.1 Association of British Insurers Where an ABI member transacts applicable classes of business ABI undertakes to do the following:

· Obtain confirmation from the CEO that the firm will comply with the Agreement by completing the ABI’s Chief Executives’ Declaration of Compliance on Age form.
· Publish on its website a list of firms that have completed the document and update this regularly. British Insurance Brokers Association BIBA’s find a broker helpline and website services are recognised for the purposes of this Agreement as providing a suitable signposting service.

This agreement allows for any regulated entity that is unable to identify a suitable provider to take the referrals for motor and travel insurance customers, to signpost to the BIBA signposting service. Each year, BIBA will publish aggregated data on the number of requests for applicable classes of business where the customer’s age is provided. Where customers use the BIBA signposting service – a telephone helpline and ‘find a broker’ website – BIBA will publish a market overview confirming: · Website enquiries for age on travel and motor
· Call centre enquiries for age on travel and motor The data will be broken down by class of business and specify age ranges where applicable. Data may aggregate all forms of cover and for all destinations. It will 1 Equality Act – A Good Practice Guide for Insurers. ABI. 2012. Transparency and Access in Motor and Travel Insurance 8 8 indicate the years reported. It should be reviewed and, if necessary, updated at intervals not exceeding one year.

 

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BIBA responds to FCA’s Our Future Mission https://www.biba.org.uk/regulation-updates/bibas-response-fcas-future-mission-publication/ Thu, 26 Jan 2017 12:08:48 +0000 https://www.biba.org.uk/?p=26080 The British Insurance Brokers’ Association (BIBA) has published its submission to the Financial Conduct Authority (FCA) in response to the regulator’s document Our Future Mission. 

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The British Insurance Brokers’ Association (BIBA) has published its submission to the Financial Conduct Authority (FCA) in response to the regulator’s document Our Future Mission.  The consultation was launched to develop a framework of guiding principles that will inform the FCA’s strategy and day-to-day work over the coming years.

Members can access BIBA’s response by clicking here.

BIBA would like to thank all those members who have taken the time to feed in their comments to this consultation.  Their efforts are much appreciated.

BIBA members’ compliance and regulation queries should be directed to: compliance@biba.org.uk

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BIBA Budget 2017 Submission https://www.biba.org.uk/consultations/biba-budget-2017-submission/ Tue, 24 Jan 2017 10:33:31 +0000 https://www.biba.org.uk/?p=26060 The post BIBA Budget 2017 Submission appeared first on British Insurance Brokers' Association.

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BIBA submitted its response to Government to the forthcoming Autumn Statement https://www.biba.org.uk/consultations/biba-submitted-response-government-forthcoming-autumn-statement/ Fri, 07 Oct 2016 15:32:20 +0000 https://www.biba.org.uk/?p=25159 The post BIBA submitted its response to Government to the forthcoming Autumn Statement appeared first on British Insurance Brokers' Association.

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BIBA response to the Select Committee on Financial Exclusion https://www.biba.org.uk/consultations/biba-response-select-committee-financial-exclusion/ Fri, 16 Sep 2016 10:44:00 +0000 https://www.biba.org.uk/?p=25060 Lords Select Committee on Financial Exclusion – Call for Evidence      The British Insurance Brokers’ Association (BIBA) is the UK’s leading general insurance intermediary organisation representing

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Lords Select Committee on Financial Exclusion – Call for Evidence     

The British Insurance Brokers’ Association (BIBA) is the UK’s leading general insurance intermediary organisation representing the interests of insurance brokers, intermediaries and their customers.

BIBA membership includes just under 2,000 regulated firms, who employ more than 100,000 staff.  General insurance brokers contribute 1% of GDP to the UK economy, they arrange 54% of all general insurance and 78% of all commercial insurance business. Insurance brokers put the client’s interests first, providing advice, access to suitable insurance protection and risk management.

Thank you for the opportunity to contribute to the Committee’s understanding of access to insurance; answers to the questions set out in the call for evidence are included below.

Q1.      Is financial exclusion the inverse of financial inclusion and, if not, how do the two concepts differ? What are the causes of financial exclusion?

Insurance pricing is risk-based with those posing the highest risk contributing more in to the risk pool by way of a higher premium, or customers being declined because the risk is too high or not properly understood by an insurer who is not specialist in that particular area of risk or does not possess the relevant knowledge. Whilst there can be risk-factors which may result in these individuals failing to find appropriate cover, it is not necessarily because the risk is uninsurable; often it can be because they are not going to the right insurance provider. The recent popularity of price comparison websites (PCWs) has resulted in a ‘computer says no’ scenario for many non-standard risks. More often than not, specialist insurance brokers can place these risks. Lack of knowledge of where to go for non-standard insurance means perceived exclusion has the same effect as actual exclusion. Appropriate signposting to providers who can help is one way this can be avoided.

Q2.      Who is affected by financial exclusion? Do different sectors of society experience financial exclusion in different ways? To what extent, and how, does financial exclusion affect those living in isolated or remote communities?

Examples of exclusion include, but are not limited to:

  1. Criminal convictions
  2. Northern Ireland conflict-related convictions
  3. Pre-existing medical conditions with travel insurance
  4. High flood risk in property insurance
  5. Older people with travel and motor insurance

BIBA has been able to successfully work with Government and other industry stakeholders to provide cover to groups such as these. Specialist brokers can provide cover to those with criminal convictions and we have worked with the Office of the First Minister in Northern Ireland to provide insurance to those with convictions related to the conflict in NI. We have several members who specialise in offering cover for people affected by terminal illness or cancer – allowing them to travel abroad, sometimes for the last time. Our flood specialist brokers have helped many customers who thought they could not get cover when they were turned away from price comparison websites and we have signed an agreement with the Government Equalities Office and the Association of British Insurers on insurance for older people. The agreement launched jointly with BIBA and Teresa May when she was Home Secretary in April, named ‘Transparency and access in motor and travel insurance for older people: An agreement on age and insurance’ is a condition of membership of both the ABI and BIBA. It mandates that if you’re not able to offer cover to an older person based on their age, that insurance provider should signpost them to someone that can help. More often or not, that customer is signposted to the Find a Broker service operated by the not-for-profit trade body BIBA. The service has helped over 243,539 older customer access insurance in the last four years.

Q3.      What is the relationship between financial exclusion and other forms of exclusion, disadvantage or deprivation? What role does problem debt play in financial exclusion?

 

Credit rating is one of the important risk factors used in motor insurance. This can provide several indicators such as likelihood to pay monthly premium instalments and propensity for fraud. In terms of motor insurance, employment status is also used, as insurers understand those who are employed are more likely to keep the vehicle in a roadworthy state – reducing the risk of accident.

Q4.      Do individuals with disabilities, or those with mental health problems, face particular issues in regard to financial exclusion?

In terms of motor insurance, cover cannot be refused based on a disability if the DVLA are satisfied as to the health of a driver and have issued a driving licence. In terms of travel insurance, 80% of claims are for medical care; therefore health plays an important role in determining risk. As mentioned above, specialist insurance brokers with expertise of complex conditions can often place these risks where price comparison websites fail. An example of this can be found in our Manifesto where a BIBA broker was able to find travel insurance for 120 WWII veterans to travel to Arnhem to attend a service to commemorate the Liberation of Arnhem in 1945.

A second example is also in the manifesto where a terminally ill man, Jason Liversidge, with both Motor Neurone Disease and Fabry disease could not find the cover needed to travel to Disney World with his family. BIBA’s Find a Broker service was able to step in and find the insurance they needed with a competitive premium (see video of Jason and Liz Liversidge explaining in their own words how they struggled, then found the cover they needed https://www.youtube.com/watch?v=Ok0nxOtVD1c).

Q5.      Are there appropriate education and advisory services, including in schools, for young people and adults? If not, how might they be improved?

Q6.      How can financial literacy and capability be maintained and developed over the course of a person’s lifetime?

Q10.    How effective has Government policy been in reducing and preventing financial exclusion? Does the Government have a leadership role to play in addressing exclusion?

We have chosen to answer questions 5 and 6 and 10 together.

There is very little in the way of financial education the takes place in schools and few other bodies who work broadly on helping the public understand how insurance can help them protect themselves and their assets.

Following the Government decision to close the Money Advice Service, identifying gaps in the financial guidance market is a relevant objective for the replacement money guidance body.

BIBA would like to propose themselves as a relevant third party who could assist in this area. As described above, BIBA is a not for profit Trade Association who run a general insurance Find-a-Broker service which helps over 250,000 general insurance customers access insurance every year.

More often than not these queries relate to gaps in the financial guidance markets where customers with unusual or non-standard risks have been unsuccessful in finding suitable insurance solutions in the general market. This is often because they find ‘the computer says no’ – this concern was raised in the FCA Occasional paper 17, Access to Financial Services in the UK in May 2016 as a barrier that can exist for consumers trying to access financial services in the UK.

Another barrier that was raised in this same paper was that 3.8 million UK households are without any internet but also 12 million people live in rural or remote areas of the UK with poor internet access. This same paper also highlights 3 million people with disabilities who have been turned down for insurance or charged extra. This goes on to say the ‘non-standard consumer’ can find it impossible to find tailored or appropriate products.

We have formally suggested a new agreement with Government that builds on our existing and successful Find-A-Broker Service that could assist in this area.

Q7.      What role should the concept of ‘personal responsibility’ play in addressing financial exclusion? Is appropriate support available for the most excluded and, if not, how should support be strengthened? What role should Government, the charitable sector and business play in tackling financial exclusion?


Personal responsibility is a key part of an insurance contract as the insured has responsibilities including a fair presentation of the risk under the Consumer Insurance (Representation and Disclosure) Act 2012, as well as other responsibilities dependant on the type of insurance, regarding due care, vehicle/home maintenance and reporting incidents that may give rise to a claim. If the insured does not fulfil the responsibilities they have an insurer may not pay their claim. Brokers, acting as agent of the client under agency law, often provide guidance on the cover they are purchasing as well the responsibilities both parties have to one another. This understanding is crucial to ensuring that an insurance policy responds when it is needed and pays the claim. Brokers usually get paid by insurer via commission rather than fees, meaning that this service often does not cost more than going direct.

Utmost good faith is a positive duty voluntarily to disclose, accurately and fully, all facts material to the risk being proposed.

BIBA has also recently launched a Code of Good Practice to help vulnerable customers in conjunction with the ABI. Under the Code participating insurers and brokers will:

  • Ensure staff are adequately trained to recognise and understand potentially vulnerable customers at renewal and be able to offer flexible options to help address needs (where necessary).
  • Periodically review legacy policies to, where possible, identify vulnerable customers to ensure they are aware of any more suitable alternative products now available.
  • Ask potentially vulnerable customers at renewal if their current policy and renewal terms meet their needs, and make clear the importance of reviewing their cover.
  • Consider if additional communication, for example a telephone call, is needed to help vulnerable customers through the renewal process.
  • Ensure that the customer’s options, and how they can exercise them, are always clearly set out.

Q8.      Are appropriate financial services and products available for those who are experiencing financial exclusion? What might be done to address any deficit? What role should banks play in increasing access for those most at risk of exclusion? What is the role of the Post Office in providing access to financial services for such customers, and how might that role develop?

Many banks opt to provide insurance cover via packaged bank accounts. There have previously been issues with the way these have been sold to which led to the regulator issuing new rules to ensure that the product was suitable for the customer. The policies offered are often limited in terms of their cover compared with quality stand-alone products sold by brokers, which can be a surprise to customers when it comes to a claim.

In terms of non-standard risks which banks, the Post Office or other providers can’t place, BIBA would suggest a system of ‘signposting ‘ to the BIBA Find a Broker service in a similar way to the ‘Transparency and access in motor and travel insurance for older people: An agreement on age and insurance’ agreement mentioned aboveensuring that those distressed risks that can’t find cover are directed to someone that can help.

Q9.      What has been the impact of recent changes to the consumer credit market – such as the capping of payday loans – on those facing financial exclusion? How can it be ensured that those in need of affordable credit can access appropriate products or services?

In terms of credit, many brokers offer insurance premium finance, allowing them to spread the cost of their premium over the period of the insurance contract.

Q11.    What has been the impact of recent welfare reforms on financial exclusion?

Q12.    How effectively are policies on financial exclusion coordinated across central Government? Is there an appropriate balance and interaction between the work of central Government and the work of local and regional authorities, and the devolved administrations?

We have chosen to answer questions 11 and 12 together.

BIBA has no comment on welfare reforms specifically; however, young people aged under 25 have seen their housing benefit withdrawn. Young drivers also experience some of the highest insurance premiums.

Young drivers make up just 12% of licence holders but are involved in 25% of road deaths and serious accidents, which tend to be more expensive in terms of claims. The increased number and costs of accidents involving young drivers mean their insurance premiums are much higher.

One way to offset this could be to promote telematics insurance policies which offer discounts to the safest drivers based on their driving behaviours. This is monitored either via a smartphone app or ‘black box’ in the car measuring variables such as speed, acceleration, deceleration, G-force in corners and familiarity of route. Young drivers in particular can make significant savings as well as

Research by the Road Safety Foundation, commissioned by Ageas and in conjunction with BIBA member ingenie, showed that an Insurance Premium Tax (IPT) break on young driver telematics products would lead to safer roads and more insured drivers. It would mean a net benefit to the UK economy of £370 million at a benefit- cost ratio of more than two to one.

Further details can be found on Ageas’ website: https://www.ageas.co.uk/documents/corporate/press/IPT_business_case_FINAL.pdf

 

 

 

Q13.    To what extent is the regulation of financial products and services in the UK tackling financial exclusion? Are alternative or additional regulatory interventions required to address financial exclusion? What balance should be struck between regulations and incentives for financial institutions?

Q14.    Does the Government have a role to play in ensuring that the development of financial technologies (FinTech) and data capture helps to address financial exclusion? If so, what should this role be?

We have chosen to answer questions 13 and 14 together.

Brokers play a crucial role in helping customers, particularly those with non-standard risks, find the insurance they need. However, research commissioned by BIBA and carried out by London Economics shows that UK insurance brokers face the most expensive regulatory regime in the world; more than double the cost of our nearest competitor, Singapore. As well as the extra cost, the extra work generated by UK regulators stifles innovation in Fintech that can help empower customers.

The sheer weight of regulatory change in recent years from the FCA and the Competitions and Markets Authority (CMA) has meant a significant amount of IT resource has been diverted away from innovation and into compliance.

For example, a leading broker software houses advised they have had to delay developments of Mylicence – a facility to automatically check DVLA’s driver licence records, and Flood Re to ensure compliance with the CMA protected no claims bonus (NCB) rules that begin in August this year as they require major systems changes.

They reported to us that new regulation CMA and FCA regulation required them to spend an additional 4,000 hours of work in ensuring compliance. BIBA would argue that something like Flood Re is far more important for customers in flood risk areas; however, because the new CMA protected NCB rules is a legal regulatory requirement we have no choice as an industry but to focus on regulation as the priority. This resulted in few brokers being able to utilise Flood Re when it launched on 4 April – ultimately meaning fewer customers can access affordable flood insurance.

The FCA’s forthcoming changes to split out add-ons into more detail and to show last year’s renewal will also take up front line resources and mean innovations such as Mylicence get pushed further down the agenda.

The UK is already the most expensive regulatory system in the world. Some of BIBA’s largest members pay comfortably over £1 million in regulatory fees and our members pay collectively over £28 million for their direct cost of regulation, but then even more than this again to ensure compliance with this constant flow of new requirements from our regulators.

At the moment we have seen no benefits from the Government’s red tape challenge and in fact for 2015-16 saw a 8.4% increase in the direct cost of regulation.

We would recommend to the Committee that now the Enterprise Act has received royal assent, that Government strongly enforce part 2 of the Bill regarding a regulators performance report and the duty to report on the effect on economic growth of regulation ‘Red Tape’.  Crucial to this helping our industry this is ensuring the FCA is confirmed as one of the designated regulators under the secondary legislation.

BIBA would be very happy to give oral evidence to the committee and we are happy to invite any committee members to come and visit the call centre to see how we can help the financially excluded to access insurance.

Yours Sincerely

Graeme Trudgill, FCII
Executive Director
0207 397 0218
trudgillg@biba.org.uk

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BIBA Responded to the Pathway to Driverless Cars: Proposals to support advanced driver assistance systems and automated vehicle technologie https://www.biba.org.uk/consultations/biba-responded-pathway-driverless-cars-proposals-support-advanced-driver-assistance-systems-automated-vehicle-technologie/ Fri, 09 Sep 2016 11:42:22 +0000 https://www.biba.org.uk/?p=25034 Pathway to Driverless Cars: Proposals to support advanced driver assistance systems and automated vehicle technologies 8.9.16 What we are proposing   Question 1A: Do you

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Pathway to Driverless Cars:

Proposals to support advanced driver assistance systems and automated vehicle technologies 8.9.16

What we are proposing

 

Question 1A: Do you agree with the proposal to review the regulatory framework to enable the use of advanced driver assistance systems and advanced vehicle technologies as they come to market in the UK? * Yes

 

It is important that the regulatory framework, including the Road Traffic Act and Highway Code, are suitable for the long term implementation of fully autonomous vehicles on the UK’s roads.

 

We would like to make a distinction between levels 0,1,2,3 and levels 4 and 5.

 

We believe levels 0,1,2,3 are catered for by the existing legal system of subrogation, where an Insurer can recover their claim payment from the motor manufacturer, garage, dealer, vehicle repairer, if it were proven they were negligent in regard to the proximate cause of the claim.

 

This system means the customer enjoys protection by the RTA Insurers and is also compensated by the RTA Insurer for payments to third parties, passengers and accidental damage to the vehicle (where comprehensive cover is selected).

 

The current RTA position is that the Insurer would not compensate for injuries to the driver of the vehicle they insured, even if not at fault, and it would be down to a legal expenses insurance or the customer’s legal representation to pursue the negligent third party.

 

With levels 4 and 5 there will need to be reform of the regulatory framework/Road Traffic Act. Here the driver/person in charge of the vehicle is in the hands of the manufacturer – in that the product they are driving is relied upon to be safe to drive. If however there was a fault with the vehicle, then we must see a different framework which delivers robust protection for the customer.

 

It would be very difficult for the driver/person in charge of the vehicle to establish a fault with the car and take the manufacturer to court. Therefore we would wish to see a change implemented to a motor insurance policy, which would provide compensation to the driver or person in charge of the vehicle for injuries they sustain, and then the Insurer could seek to subrogate from the manufacturer.

 

It is important that the driver/person in charge would also receive compensation where a vehicle fails in autonomous mode and the driver takes back control of the vehicle but is still unable to prevent the incident.

 

Current UK law, the Motor Vehicles (Compulsory Insurance) Regulations 1992 and the Employers’ Liability (Compulsory Insurance) Exemption (Amendment) Regulations 1992, is that liability for injury to passengers travelling in motor vehicles arising out of and in the course of their employment fall under motor policies where the liability is an RTA liability.  Consideration of similar protection for the driver/person in charge of an autonomous vehicle being injured in the course of his employment must also be made.

 

In this regard it is also vital that the customer, their agent and the insurer are permitted unrestricted and immediate access to the information and data from the vehicle, this information should be in a standard, clear, accessible and consistent format. This would be similar to now, where a motor engineer’s report would confirm if the vehicle had brake failure etc. and is important evidence in establishing negligence. This is important as there is a concern over how willing the manufacturer would be to provide an admission of liability. This would ensure a potential block to justice is prevented. E.g. it took Vauxhall some considerable time before they accepted the issues surrounding the Vauxhall Zafira engine fires. The customer should not be left without compensation as they cannot access, what we would say is, their own data.

 

It is also important that vehicle manufacturers are not permitted to use the ‘State of the Art’ defence to try to deny these claims, so the law must be clear in these cases too.

 

 

 

Question 1B: Do you agree that we should follow a rolling programme of regulatory reviews? * Yes

 

With the implementation of new technologies and/or methods of using said technologies, it would be prudent for the Department for Transport to periodically review the regulations to ensure that they were fit for purpose and took into account any changes that may have happened since the last review. We would suggest this is done on a regular basis and completed with input via consultation.

 

These reviews should apply to both the Insurance sector and the vehicle manufacturers and repairers.

 

Question 1C: In the first wave of regulatory change, with the exception of insurance, should we only consider those advanced driver assistance systems or automated vehicle technologies that are likely to come to the UK market in the next 2-4 years? * Yes

 

If a rolling programme of reviews were to take place as per Question 1B, this would mean that the Government and respective industries involved with autonomous vehicles would only need to consider technologies likely to come to the UK market. This ensures that the focus of the Government and respective industries is on those technologies UK motorists are most likely to be using.

 

However as vehicles will be visiting the UK from overseas the Government will still need to be mindful of foreign vehicles with this technology being driven on UK roads.

 

Question 1D: Are you aware of any upcoming advanced driver assistance systems or automated vehicle technologies which this document does not cover? * Yes Which systems?

 

We have been made aware of developments surrounding voice control and gesture controls which were not part of this consultation.

Insurance A proportionate response

 

Question 2A: Do you agree with the proposition to amend road vehicle compulsory insurance primary legislation in Part 6 of the Road Traffic Act 1988 to include product liability for automated vehicles? * Yes

 

 

It is vital that the innocent victim of a road traffic accident receives compensation.

 

For levels 0,1,2,3 we believe the existing legal situation is acceptable.  However for levels 4 and 5 we are also seeking that insurers provide indemnity for losses if the claim is caused by a failure of the autonomous vehicle – whether this be its sensors, programming, cyber hack or anything else.

 

We understand that Motor Insurers are agreeable to insuring these risks in a standard motor policy and then would seek to subrogate from the negligent manufacturer/ repair garage/ dealer. Therefore it is vital that motor manufacturers share openly with their customer/customer’s broker/ customer’s agent/ customer’s Insurer all the data openly and honestly in order to establish the cause and any culpability. It is also important that manufacturers are not allowed the ‘State of the Art’ defence to try to deny these valid claims.

 

Products liability insurance policies in their current form are not suitable and are limited in award (which is a challenge considering the current requirement for unlimited personal injury cover under the RTA) and it would therefore be necessary for Insurers to design entirely new products.

 

The current insurance model was not designed with autonomous vehicles in mind and, should there be a collision with a vehicle employing AVT and that vehicle was at fault; liability would most likely be attached to the manufacturer of the technology that failed, rather than the driver. Therefore for levels 4 and 5 motor Insurers would need to cover these risks and subrogate from the manufacturer and their product liability insurance (or self-insurance).

 

Therefore the Government should consider legislating to ensure that motor vehicle manufacturers have in force appropriate liability insurance that will respond to claims for autonomous vehicles that may arise in the future, or hold sufficient reserves to be able to indemnify those claims that are being subrogated against them by Insurers.

 

 

Question 2B: What, if any, other changes to the insurance framework should be considered to support use of AVT? Why?

 

 

Motor policies on-the-whole do not specify cyber cover and this would also need to form part of any changes to a policy for an autonomous vehicle, making it clear that the motor Insurer would indemnify and then seek to subrogate from the negligent party.

 

Insurance has always been there to compensate the innocent third party. Should a disagreement regarding liability occur between an Insurer and vehicle manufacturer, this would be detrimental to the third party as it may delay the payment of their claim. Therefore, a seamless insurance policy, that would make motor Insurers statutorily liable for accidents while in autonomous mode, would be most suitable for a customer (even if the incident was caused by cyber / product failure) and then allow subrogation against manufacturers.

There would also need to be a model in place to take account of failure due to an error from the garage/dealer/repairer/ service organisation including sufficient limits of indemnity to provide compensation.

 

We also believe the insurance requirement should remain the responsibility of the ‘user’ which is why we do not think that the manufacturer should deny any claim if the vehicle owner had not uploaded the latest upgrade as this would be out of the hands of the user (see our reply to 2H).

 

We believe that this model would allow for free competition in the motor insurance market, allowing customers to choose where they buy their insurance and have the necessary protections in place.

The benefits and impacts of changing insurance for automated vehicles

 

Question 2C: If you are an insurer, vehicle manufacturer or other organisation directly affected by these changes, what costs do you estimate your organisation will incur as a direct result of these changes?

 

There is a concern within the insurance industry that motor manufacturers will retain information generated by the driver/vehicle and will either enter the motor insurance market with exclusive partners, or charge a premium to access this data. We strongly believe that this would be anti-competitive, uncompetitive and that the data is owned by the customer and should be accessible by the owner of the vehicle or their agent. This would enable the owner to shop around for insurance and help to keep claims costs down – ultimately reflecting in lower premiums. We also believe there is no difference from the current system of Insurers accessing technical reports on the reasons for conventional vehicles failing today.

 

Question 2D: Do you anticipate the cost of insurance products for vehicles with AVT to be higher than for conventional vehicles? * * No By how much and why?

 

Currently, 90% of accidents are caused by human error. Therefore, claims frequency should be much lower for vehicles with AVT; however, this must be balanced with the potential increased cost of claim for repair as there will be many technologies, such as expensive sensors, that could be damaged in a collision and may need to be replaced.

 

The UK motor insurance market made a £31m underwriting loss in 2014 and it last made an underwriting profit in 1994 (source: ABI Key Fact Guide).

 

We expect there to be more people in an autonomous car, making fewer journeys, ultimately there could be fewer physical vehicles on the road.

 

Overall, our members expect the total claims cost caused by human error to be dramatically reduced with autonomous vehicles. However, higher damage repair costs and the introduction of a cyber element will offset some of this. We anticipate slightly higher premiums to start with, but a potential reduction over time as the market learns and adjusts with the availability of claims data for actuarial review and the technology becomes more reliable. Therefore in the longer term we anticipate premiums for autonomous vehicles could be less than for a similar conventional vehicle.

 

Question 2E: Do you anticipate the introduction of vehicles with AVT to increase insurance premiums for conventional vehicles? * No Why?

 

 

Once there is a critical mass of vehicles with AVT on the roads, conventional vehicles may also benefit from lower accident rates, therefore lower premiums in the longer term.

 

Question 2F: What do you estimate the costs will be to insurers, vehicle manufacturers, or other parties of providing product liability cover for automated vehicles, and why?

 

As these are emerging technologies, there is a lack of actuarial data on which to base price.

 

There is also a significant build cost for the insurance industry to ensure the infrastructure and products are in place.

 

Therefore, premiums may be cautiously high initially; however as claims rates/exposure is more understood and there is more availability of products in the market, premiums should start to fall as per 2E

 

Question 2G: Do you anticipate that this cost will be passed on to the consumer * Yes Why, and by how much?

 

New Product Liability and Cyber Insurance elements of cover would likely be priced into the motor  insurance policy sold to owners of vehicles with AVT; therefore the customer would benefit from a potential lower accident rate compared to a conventional vehicle, but the cost of this insurance would be passed on to the customer as they pay the premium.

 

Insurers would also need to consider their ability to recover losses from vehicle manufacturers and also the solvency of vehicle manufacturers, when pricing insurance for an autonomous vehicle

Failure to maintain automated vehicle technology, inappropriate use, and circumventing automated vehicle technology

 

Question 2H: Do you agree that where a driver attempts to circumvent the automated vehicle technology, or fails to maintain the automated vehicle technology, the insurer should be able to exclude liability to the driver but not to any third parties who are injured as a result? * Yes  Why?

 

There are two separate issues here, the innocent and the deliberate circumstance when someone has adjusted the AVT.

 

The proposal would involve amending the current section 148 of the Road Traffic Act regarding avoidance of certain exceptions or securities, but we agree this would be preferable as it would keep the consistency with conventional vehicles that are on the road where a driver is at fault.

 

So what we would like to see is the innocent third party compensated, but no accidental damage cover for the customer, if they have purposely tampered with their autonomous vehicle deliberately and against manufacturer’s instructions – unless agreed prior to the change.

 

We also believe that customers must be given sufficient time to update their software and numerous warnings given before any cover is invalidated. Our expectation is that the insurance must have an element in it that will ensure the policy is not invalidated just due to a late software update. Customers must not be prejudiced in these situations.

 

One further consideration is that new vehicles are only required to submit to an annual MOT after the initial 3 years. With this new technology the DFT may want to consider if this is an appropriate period for AVT vehicles.

Third party hacking

 

Question 2I: Do you agree that in the event of 3rd party hacking of an automated vehicle, an insurer should not be able to exclude liability, as set out in the Consultation Document? * Yes  Why?

 

An amendment to the Road Traffic Act would be needed and this would bring vehicles with AVT in line with conventional vehicles.

 

Although cyber is a developing market with little actuarial information on which to build products, it is crucial, certainly in the case of AVT, that a separate standalone cyber policy would not be the answer and cyber risks should be part of the overall motor insurance policy.

 

It is likely the effectiveness of the software/firmware in preventing hacking could become one of the rating factors of the vehicle.

 

Cyber risks should be covered under the motor policy, however if there is a mass cyber-attack from a terrorist or similar type of organisation, taking control of numerous vehicles, then this would need further consideration by the Government in line with other terrorism pooling arrangements .

Product liability and automated vehicles

 

Question 2J: Do you agree that the product liability and insurance requirements for automated vehicles should:

  • follow the normal rules on product liability with different rules depending on whether the injured party was an individual or a company? ** No
  • be limited by the ‘state of the art’ defence, as set out in the Consultation Document? * No Why?

 

There should not be any disparity between conventional vehicles and autonomous vehicles on the road. Where a vehicle has been involved in a collision and is at fault, the RTA currently provides that innocent parties are compensated. All types of risk – whether they be failure of the product or cyber should follow the same precedent regardless of if the injured party was an individual or a company.

 

It is hugely important that the ‘State of the Art’ defence should not apply to product liability for autonomous vehicles. It is important that the innocent party is compensated, whether due to the fault of the driver or vehicle. As we are considering RTA risks, we must remember the reasons the RTA exists and not allow manufacturers any way of not fulfilling their responsibilities in reimbursing Insurers for claims they have paid out for an innocent/injured party. Any manufacturer willing to put autonomous vehicles on the road should take full responsibility for them and be willing to compensate Insurers for their outlay.

 

Question 2K: Alternatively, should we extend insurance/liability rules specifically for automated vehicles? * Yes Why?

 

As per 2J

 

Public sector vehicles

 

Question 2L: Do you agree with the proposal that, with respect to automated vehicles, the public sector can continue to self-insure but, where they choose to self-insure, they would then be required to step into the insurer’s position in respect of product liability damages? * Yes  Why?

 

This should replicate the current situation with regards to conventional vehicles.

 

An alternative option: a first party insurance model

 

Question 2M: Do you agree that an alternative first party model option would not be proportionate while automated vehicles represent a small proportion of the fleet? * Yes * Why?

 

The first-party insurance model may not allow Insurers to control costs and could introduce much more litigation to the system, potentially increasing premiums by a significant amount. However, we think a hybrid system is suitable where the Insurer could indemnify the user/driver/ person in control of the autonomous vehicle and then recover from any negligent manufacturer.

 

Question 2N: What do you anticipate the cost of implementing a first party insurance model would be?

 

Difficult for the broking community to advise.

 

Next steps

 

Question 2O: Do you have data to support your answers on insurance for automated vehicles?

 

Not at this point in time.

 

Highway Code and Construction and Use Regulations Highway Code ADAS guidance

 

Question 3A: What are your views on amending the text of the Highway Code in a way that would clarify rule:

  • 150, related to use of driver assistance systems and distraction?
  • 160, relating to driving with both hands on the wheel?

 

These rules could be amended, however it would need to be made clear that this was for autonomous vehicles in full autonomous mode so as not to introduce the unintended consequence of encouraging bad driving behaviour. Perhaps this could be done with a separate section in the Highway Code for autonomous vehicles to avoid confusion.

 

Enabling platooning

 

Question 3B: Do you agree with the proposition to allow platooning by relaxing Highway Code rule 126 (which recommends a 2 second gap between vehicles)? * Yes * No Why?

 

To gain the maximum fuel efficiency benefit of platooning (in terms of aerodynamics), the gap should be decided by what is deemed to be the safest distance and this reflected in the Highway Code.

 

Question 3C: What, if any, other restrictions should be considered regarding use of platooning technologies, and why?

 

Platooning works best when there are fewest variables and increased predictability of behaviours. Platooning would not be suited to roads where pedestrians have access; therefore our suggestion is that platooning is limited to motorways only.

 

On motorways at present there are sometimes problems when trying to take the exit at busy times, with slower moving HGV’s preventing access to the inside lane. The technology would need to be adapted so that this would not be a problem for platooning vehicles.

 

Consideration should be made to allow ‘undertaking’ of autonomous HGV’s platooning on motorways where they are in the middle lane.

In France there is a requirement for HGV’s to leave a gap of at least 50 metres although this is not always complied with.

 

Driver disengagement/re-engagement following platooning/autonomous driving is an area where it is essential that the technology asks for affirmative action by the driver to take control and, if no response is received within a defined timescale, the vehicle safely pulls in and stops. Such action could then act as an indicator of liability, should an accident occur, as to whether the vehicle or driver/person in charge was in control at the time.

Freeing the driver to make use of the automated vehicle

 

Question 3D: Do you agree with the proposition that specific and implied driver distraction restrictions are not relaxed at this time? * Yes Why?

 

A number of different autonomous vehicle providers have different levels of automation. For example, Tesla’s Autosteer function “requires drivers to remain engaged and aware when Autosteer is enabled. Drivers must keep their hands on the steering wheel”.

 

Relaxing distraction restrictions before level 4 and 5 automation has been proven, and when there is a mix of AVT vehicles on the road, could confuse drivers. This also means that should automation fail in some way during the early days of this technology in the real world, the potential for the driver to intervene would be much reduced.

Construction and Use Regulations Remote control parking

 

Question 3E: Do you agree with the proposed approach to enable remote control parking by clarifying:

  • Regulation 104 (the driver should be in a position to be able to control the vehicle)? * Yes
  • Regulation 107 (switching off the engine when the vehicle is not attended)? * Yes
  • Regulation 110 (not using hand-held mobile phones while driving)? * Yes Why?

 

It is important to note that currently, should a driver leave their keys in a vehicle with the engine started such as to warm it up on a cold morning and the vehicle is stolen; this may not be covered under the theft section of a motor policy.  In fact some motor policies will exclude theft if a vehicle is left unsecure or unattended, irrespective of whether the keys are removed.

 

The example given in the consultation paper, that a vehicle could be remote started to warm it up, would need technologies built into the vehicle ensuring it could not be taken away by anyone other than the owner.

 

Motorway assist

 

Question 3F: What are your views on amending Regulation 109 to allow drivers to view TV/display screens displaying information that is not related to the driving task, while driving?

 

This should not be changed until level 4 and 5 and when full automation has been shown to work for a significant period of time. Additionally, it should be made clear that this is for whilst an autonomous vehicle is in full autonomous mode on the motorway only. There is a risk that this may encourage those who do not have full autonomous mode to have TV/display screens which would be hugely unsafe.

 

The benefits and impacts of ADAS

 

Question 3G: Do you have any data or evidence of the safety benefits of these advanced driver assistance systems?

 

Not at this time

 

Question 3H: Are there any other, non-safety, impacts (including costs) of ADAS, which we have not covered in this consultation document?

 

Not at this time

 

Question 3I: Please supply any data to support your answers.

 

N/A

 

Summary of top four issues:

 

  1. A single seamless motor insurance policy should provide indemnity for risks including a failure of the autonomous vehicle through levels 0-5, however caused, including a cyber-attack.
  2. Ensuring the customer and their Insurance Agent/Broker/Insurer has immediate unrestricted access to all data from the autonomous vehicle manufacturer and that the data is in a standard, clear, accessible format.
  3. Ensuring Motor Insurers have a clear and fair right of subrogation against a manufacturer– not allowing manufacturers the ‘State of the Art’ defence.
  4. The driver or person in charge of the autonomous vehicle to be eligible under the Road Traffic Act to receive compensation from their insurance company for their injuries sustained due to a defect in the vehicle whilst in fully autonomous mode (levels 4 and 5).

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BIBA responded to the DVSA Improving the Car Driving Test consultation https://www.biba.org.uk/consultations/biba-responded-dvsa-improving-car-driving-test-consultation/ Fri, 02 Sep 2016 11:02:59 +0000 https://www.biba.org.uk/?p=24972 Have you taken part in the trial of the new test, in the capacity of an ADI (answers only requested from ADIs)? We have not

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  • Have you taken part in the trial of the new test, in the capacity of an ADI (answers only requested from ADIs)?
  • We have not answered this question as we are responding on behalf of an organisation.

    1. Have you taken part in the trial of the new test, in the capacity of a learner/ accompanying driver (answers only requested from learner/newly qualified/accompanying drivers)?

    We have not answered this question as we are responding on behalf of an organisation.

    1. Do you agree with the proposal to increase the independent driving section of the test from 10 to 20 minutes?

    Yes, as that would increase the time that instructors have to view the natural behaviours of the driver as they negotiate a route they have chosen to get from one location to another.

    1. Have you any comments on the proposal to increase the independent driving section in the test from 10 to 20 minutes?

    Increasing the driving element gives the instructor more time to observe behaviours; however, the classroom element of the test should be a very important part of the process of learning to drive.

    Results from Northumbria Police prove that classroom training for speed awareness courses improves awareness of road safety issues, with 78% of drivers who attended saying they are more likely to keep to the speed limit and 91% learning something new.

    96% said these courses should be offered to more drivers to make roads safer. BIBA and our Motor Panel, including the AA which has enormous experience of providing driver education courses on behalf of the police as well as driving schools, believe improving access to road safety education will dramatically improve the preparedness and ultimate safety of young drivers. These drivers are currently the highest risk element of the driving community, with more than five times the propensity to be involved in an accident than an over 35-year-old driver.

    As such, BIBA believe that the learning provided in these types of courses should be provided to learner drivers to help prevent speeding, therefore reducing the number of accidents on the roads. The driving test provides an obvious opportunity for this to happen.

    As insurance premiums are risk based and young drivers often have the highest premiums because of their increased rate and severity of accidents, another benefit of this approach may be more competitive insurance premiums.

    Fewer accidents will mean the risk profile of young drivers would lessen, enabling the insurance industry to reflect this in terms of premiums.

     

    1. Do you agree with the proposal to include the use of sat navs in the independent driving section?

    As satellite navigations systems are used on a regular basis, it seems sensible to include their use in the driving test as it reflects normal driving experiences. However, this part of the test should be careful not to take anything away from the important independent part of the test which involves navigating to a particular location as reading directional road signs is an important part of driving.

    Members also raised the point that sat navs vary in their presentation and functionality and can also contain map errors. This should be taken into consideration.

    1. Have you any comments on the proposal to include the use of sat navs in the independent driving section?

    Extreme care should be given to avoid the unintended consequence of encouraging people to use mobile phones behind the wheel. Many smartphones now contain the functionality to act as navigation devices, similar to sat navs. There is a concern from our members that encouraging the use of sat navs in the test may also encourage people to use mobile phones – an offence which was recently consulted on by the DFT.

    During driving instruction and the test itself however, it must be strongly emphasised that these devices should need to be fixed to the vehicle in a cradle or similar and only programmed when the vehicle is stationary. It is not uncommon for drivers to either programme these or hold the device whilst driving – inhibiting their ability to use both hands and react to hazards in an appropriate way.

    The final concern we have is regarding those that use a mobile phone as a sat nav device. These devices will continue to display notifications of messages or social media updates whilst in operation. We have concerns that this may distract the driver and tempt them to read the message or notification which would be both dangerous and distracting.

    1. How often do you replace your sat nav?

    We have not answered this question as we are responding on behalf of an organisation.

    1. Do you agree with the proposal to modify manoeuvres so they take place during the natural course of the drive and augmenting them with new, realistic exercises?

    Yes.

    1. Have you any comments on the proposal to modify manoeuvres so they take place during the natural course of the drive and augmenting them with new, realistic exercises?

    This seems like a common sense approach which would replicate real-world driving, so long as the manoeuvres continued to form an integral part of the driving test.

    1. Do you agree with the proposal to change the format of the vehicle safety questions so that one of the two questions is asked while on the move?

    Yes.

    1. Do you have any comments on the proposal to change the format of the vehicle safety questions so that one of the two questions is asked while on the move?

    This seems like a common sense approach which would replicate real-world driving, as well as providing the most efficient use of time during the test.

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    BIBA responds to Foreign and Commonwealth Office consultation – Travel Advice https://www.biba.org.uk/latest-news/biba-responds-foreign-commonwealth-office-consultation-travel-advice/ Fri, 22 Apr 2016 14:53:43 +0000 https://www.biba.org.uk/?p=24340 The British Insurance Brokers’ Association (BIBA) is the UK’s leading general insurance intermediary organisation representing the interests of insurance brokers, intermediaries and their customers. BIBA

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    The British Insurance Brokers’ Association (BIBA) is the UK’s leading general insurance intermediary organisation representing the interests of insurance brokers, intermediaries and their customers.

    BIBA membership includes just under 2,000 regulated firms who employ more than 100,000 staff. General insurance brokers contribute 1% of GDP to the UK economy; they arrange 54% of all general insurance, 36% of all general personal insurance and 78% of all commercial insurance business. Insurance brokers put the client’s interests first, providing advice, access to suitable insurance protection and risk management.

    As discussed, we are responding to the questions raised in your e-mail not to the consultation questions.

     

    1. How do you and your customers use our travel advice service? Where and when is it most useful?

      It is a challenge for an individual insurance broker to be aware at any one time of the different risks in over 225 countries around the world, therefore having a Government service that provides a real-time RAG system is most useful. We find the most beneficial element the online service are maps with the facility to drill down to show which areas are safe or unsafe. This enables our members to give helpful guidance to customers planning trips abroad also helping them to avoid invalidating their travel insurance through entering into any amber or red areas.

      The service is most often used at point of sale so that advice can be given about what insurance policy restrictions might apply in  particular countries that may be considered a higher risk than normal. It is also a useful tool after an incident such as an act of terrorism or natural disaster providing important advice and information to travellers and the insurance sector.

    2. What works and what doesn’t work for you about the current travel advice system? What changes would you like to see?

      a) Listing medical facilities online

    We believe that any extra detail or comments about local medical facilities would be helpful on two counts. Firstly, for any traveller requiring medical attention to more easily find suitable facilities and secondly for travel insurers, who have informed us that this would help in underwriting risks.

     

    We understand that local embassies have a list of medical facilities and we would recommend that they be listed or linked to on the site, with an indication of which are state operated.  This is particularly relevant in EHIC card participating territories as the arrangement applies to state medical facilities but is of not benefit if travellers are taken to private facilities.

    b) Accessing insurance

    Some holiday or business travellers find it difficult to find insurance perhaps due to for example; pre-existing medical conditions, older ages, gap-year travel, hazardous pursuits etc. and our not for profit Find-A-Broker service has been most successful in helping travellers  contact specialist brokers to access suitable travel insurance.

    BIBA is a lead participant in the Government’s Age agreement – transparency and access in motor and travel insurance for older people. where in three years we have helped 87,458 holiday makers access cover they would have otherwise been unable to find. We therefore suggest the FCO website gives greater prominence to BIBA’s Find-A-Broker not for profit service in order to help holiday makers access the important travel insurance protection they need.  Currently there is only a minor mention of this service under the legal expenses section which is of course only a small element of travel insurance cover.

    1. c) Mapping
      We think country maps are helpful but note that not all countries seem to have a map and would suggest this always be included.
    2. d) Insurance advice
      We were pleased to see that this site is mobile optimised, that it covers concerns over the suitability of packaged bank account insurance limits, that it highlights the fact that some matters require referral to insurers ie  medical conditions, hazardous activities and also points out there may be and limits on possessions covered .

     

    However, we think there needs to be clearer and more detailed information about checking  home insurance; currently in the overview section it is not clear what you are suggesting should be checked. We have assumed it refers to  personal possessions cover worldwide.
    Finally, in the emergency medical section you say that it is important to answer any questions from your insurer.  However, many policies are distributed through brokers or other intermediaries so either they should be mentioned specifically or you should use the term ‘insurance provider’.

    e) Essential travel
    Some  insurance providers have said the term “All but essential travel” can be confusing with some customers asking what constitutes “essential travel”. It would be helpful to see examples of what is considered essential.

    1. How helpful would the introduction of a four tier system be to you?  How would this change or influence your business decisions?  What impact would it have on customer behaviour?  Would it make a difference to ordinary travel insurance or for company travel insurance (such as insurance for loss of earnings, loss of business or public liability cover for tour operators)?

      We would welcome an additional fourth tier set between green and amber that recommended ‘extra vigilance’ for travellers. We think that this is very sensible and helpful to customers who may be unsure about which areas of certain countries might have a temporarily heightened level of risk but not to the extent which you would warn against all but essential travel.

      We have spoken to our members and to insurers about the potential for this and have asked them if they believe it would trigger cancellation of the policy in the same way as the current amber and red warnings. They do not believe this will be the case and have advised cover would continue up to an amber warning (against all but essential travel).  It would also be very difficult to prove that an individual had not sufficiently exercised extra caution and vigilance so we believe it would be extremely difficult for any insurer to deny cover to a customer if they were caught up in an incident in an area of ‘extra-vigilance’.

    Some providers have warned that introducing a new tier warning of ‘extra vigilance’ may lead to more cases of people having a disinclination to travel, which is not covered under travel insurance policies.

    1. How useful would you find it if we stopped using our fixed levels of terrorism threat (high, general, underlying and low) and replaced these with more background information on the frequency and type of terrorist attacks?

    We would welcome the additional information regarding the background, frequency and type. However, we would still find it helpful to have the overarching fixed level of high, general, underlying and low as the FCO are far better placed to make that high level judgement than any individual person reading background information. Ultimately, people need a clear and simple indication as to whether it is safe for them to travel or not.
    I would be very happy to discuss our response with you in more detail.

     

     

    Yours sincerely

    Graeme Trudgill, FCII
    Executive Director
    0207 397 0218
    trudgillg@biba.org.uk

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