BRANKO BJELOBABA, DIRECTOR OF BRANKO LTD
Industry guidance has been designed to address the five outcomes for commercial customers that the FSA is seeking. Commercial customers should have clearer and more comparable information about: The commissions intermediaries receive • The services intermediaries are providing • The capacity in which an intermediary is acting • How they should be alerted to their right to request commission information • How the presence of a distribution chain needs to be made clear.
Clearly changes will need to be made to procedures, processes, terms of business agreements(TOBAs) and client facing contract documentation issued by brokers.
You need to take reasonable steps to identify any conflict of interest that has a detrimental effect on your client (that arises from remuneration arrangements or business models). If you have super commission deals that allow you to sell super policies then great but if these deals put your income before the client you have a problem as you act for the client and in their best interest. To sell a policy that is not as good but is one that earns you quite a bit more is simply wrong and not treating customers fairly (TCF). When you are assessed for TCF the FSA will ask for your business split and this might show up any special deals you have.
Firms have to establish and maintain systems and controls that are appropriate and they have to employ effective organisational and administrative arrangements.
Some brokers act with different levels of capacity – do you act for the insurer or the client or for both? The Insurance Conduct of Business Sourcebook (ICOBS) requires that a commercial customer is given contract-specific disclosures pre-sale but a generic, non-client and non-contract specific TOBA may not fit the bill. These documents, or the Statement of Demands and Needs, need to be client and contract specific and accuracy is important.
Addressing your status and breadth of choice, is the client clear how much work you have done and with whom? At new business stage and at renewal? Generalised statements in your TOBA that you are an independent PMI specialist with wide (or complete!) access to the whole market may not be totally true especially when you only ever place cover with half a dozen insurers! What happens at renewal? If you don’t look elsewhere to see what insurers can do you should explain that to the client and not pretend that you have been to a dozen providers.
Do you invite, in a clear and prominent way, customers to ask about your remuneration? The TOBA alone is not enough – it is suggested you include this (clearly) in your statement of demands and needs/quote letter/suitability statement/renewal letter. You should then have a process in place to ensure that the client receives full, accurate and timely disclosure of your total remuneration. This will include the value of any contingent arrangements, profit shares, volume over-rides, soft loans, etc.
The chains – do you use other brokers to get to the insurer? If so, tell the client. These measures should help you to implement the new FSA industry guidance on disclosure to your commercial clients.
MEMBER PROFILE
LOUISE O’GORMAN – HEALTHCARE CONSULTANT, TURNER AND COMPANY
How and when did you start advising on PMI?
I began working in life and pensions administration, and after successfully sitting my FPC examinations, moved into research on employee benefits. In 2006, I was given the opportunity to expand our healthcare division within Turner & Co.
Do you advise on individual/corporate – or both?
We do have a mixed client base but the majority of our
clients are SMEs. I enjoy advising both individuals and SMEs on healthcare, and have retained a comprehensive knowledge of all employee benefits.
What time does your day start -what time does it end?
I don’t really have fixed hours. My hours are generally dictated by clients, and the ever increasing paperwork!!
Who/what gets you through the day?
Apart from tea and coffee, although I deal solely with Healthcare, I still work as part of a team with supportive colleagues.
Do you work with introducers and, if so, how?
No. Essentially, Turner and Co is predominantly a general insurance brokerage and therefore our leads and referrals are generated in-house from our existing client base.
What in your view is the key issue in the PMI market today?
To provide fair and independent advice to all clients. Also, medical inflation, coupled with claims and ever increasing insurer costs means securing a favourable renewal price for each and every client can be very hard work, but equally rewarding. I would also like to see more transparency with claims sharing.
How much time do you spend seeing clients?
Again, this is led by the clients. I suppose we all have peaks and troughs really when it comes to renewal date but if a client needs support, then that’s where I will be, although paperwork for healthcare does tend to leave you sitting at a desk more often than not!
Who in the PMI industry do you most admire and why?
Well, for me this is easy. I would have to say Mike Izzard. Mike and many others at Premier Choice have been instrumental in assisting us to build a solid foundation for our healthcare division with their knowledge and continuous support. His drive and passion towards the industry are clear to see and very infectious.
What/which PMI product/s do you currently most rate and why?
That’s quite tough really, there are so many products on the market but as we are independent, we have to look at each product on its own merits and our main objective is to meet our clients’ needs.