We do appreciate that the main issue with a normal commission arrangement is transparency .
Under current market practice , the customer , at best , is likely to have only a vague idea of the amount of commission . In December 2007 , a report by CRA International found that , typically , mid-sized commercial customers believe commission is around 10 % when it is nearer 20 %.
Disclosure rules dictate that you must alert commercial customers to their entitlement to information about the firm ’ s earnings . Firms should also provide consumers with that information if requested in order to fulfil their legal obligations as an agent of an insurer .
We also believe that firms , where appropriate , should adopt a policy of transparency and disclosure as far as total remuneration ( that is including contingent earnings ) is concerned . Firms should also consider providing sufficient information as part of their sales processes to enable a customer to understand the existence and nature of earnings and commission sharing arrangements , to enable a customer , where necessary to make an informed decision .
The European Commission is currently reviewing the Insurance Mediation Directive with the specific aim of introducing clear and effective rules on managing conflicts of interest and it seems likely that IMD2 will include remuneration disclosure in some form .
FCA application process time drops
The average turnaround time for a general insurance intermediary application has now reduced from 22 to 18 weeks . This is quite a significant improvement in a short time , so the FCA should be applauded for its efforts , and additional measures are being taken to improve this still further .
All this is against a backdrop of an average 110 new applications per month .
For Variations of Permissions , the average time is 8 weeks . However , the number of applications has more than doubled since this time in 2012 , so this is being carefully monitored by the FCA .
Application Fees
The FCA will now consider whether the application fees are at the right level , given that they have remained unaltered for many years and there will be a Consultation Paper later this year .
Common issues
A number of common issues have been identified by the regulator in applications that have been received and all of these serve to delay the application being fully considered . Remember the six month requirement for determining an application does not start until the FCA is satisfied that they have received a fully completed application with no gaps .
The following are the most typical errors that delay applications :
• A clear business plan that clearly articulates the conduct risks and the way in which the firm will
Join the discussion
seek to mitigate and manage these risks .
• Form - As for all persons applying for a controlled function submitted and correctly signed with no gaps in employment history .
• A clear structure chart detailing all controllers . Ideally , this should also include all shareholders and associated companies .
• Controller forms for all controllers and their accounts ( where appropriate ).
• A location of office secured , where there is no actual physical office in place at which trading can take place .
• Complete financial forecasts including an opening and closing balance sheet , profit and loss and cash flow forecasts for the first 12 months of operation .
• Business bank account opened . The lack of such an account is an issue and all applicants must have an account in place when the application is submitted .
• PII quote provided , or evidence that PII is already in place .
• How the firm will meet new financial resources requirements , particularly where there is a significant proportion of goodwill on balance sheet .
Approximately 1 / 3 of all applications have significant errors . The use of a good compliance consultancy firm , such as RWA , can pay dividends as such a firm will be able to vet all applications and documentation to make sure that there are no errors or omissions which could slow down the process .
RWA handle many applications and have all the experience necessary to guide you through the process .
Please contact Terence Clark on 07595 120972 .
Join the discussion