Compliance with FSA regulation is an unavoidable aspect of doing business in the insurance industry and finding a reliable way to meet FSA compliance requirements at a reasonable cost is critical to achieving success.
Our mission is to provide cost effective solutions to assist our clients in meeting or exceeding their regulatory obligations and by doing so improve their business performance and profitability. We summarise this as "Turning Burden into Benefit".
ALREADY A CLIENT? Click here to switch to your own site ICS-ONLINE
For the very latest news and press stories concerning insurance and regulation visit our Latest News page
IPT on fees
The Pre-Budget Report – issued in December 2009 – raised the spectre of bringing certain fees charged under a
separate contract in connection with personal lines insurance into the scope of IPT. The wording employed was
imprecise, and open to an interpretation that many broker fees would be chargeable.
Quite apart from the cost of this and the administrative inconvenience, this seemed to entail the disclosure of fee
information to insurers – as they were expected to collect the IPT from brokers. Many brokers felt that it would
be commercially disadvantageous to give this information to insurers.
In the budget, the legislation has been clarified, and it is clear that most broker fees will not be included
within the scope of IPT. Those that are will be akin to those which were charged by Homeserve, and which gave
concern in the first place to the Revenue that IPT was being avoided by classifying “premium” as “fee”. When fees are subject to IPT the effective date is now that of the budget; 24th March 2010, and not backdated to 9th December 2009 as originally proposed.
Threshold Condition 4 - Capital adequacy
FSA has issued a Dear CEO letter concerning capital adequacy. The FSA is particularly concerned in view of the continuing challenging business environment. It says that insurance intermediary firms who have not recently undertaken a financial resources assessment should do this, and if they are not complying with the requirement to have adequate financial resources, they should immediately strengthen their financial position. The letter adds that firms should be in a position to share their current assessment of the adequacy of their resources with the FSA on request. The requirement for regulated firms to have adequate resources, including financial resources, at all times is set out in Threshold Condition 4 in the FSA Handbook
Client Money
The Financial Services Authority (FSA) has sent a letter and report to the chief executive officers (CEOs) of major insurance brokers and investment firms which are able to hold money or assets on behalf of clients. The letter draws attention to the FSA’s concerns over the handling of clients’ money and assets.
A report accompanied the letter containing details of visit findings, and highlighting some of the weaknesses discovered.
These included:
- poor management oversight and control;
- lack of establishment of trust status for segregated accounts;
- unclear arrangements for the segregation and diversification of clients’ money; and
- incomplete or inaccurate records, accounts and reconciliations.
The FSA has already taken measures against a number of the firms that it visited, including referring two firms to enforcement, freezing a firm’s assets and commissioning skilled persons reports.
Treating Customers Fairly (TCF)
The FSA's progress around the country has reached the capital with London Phase 1 in West London in last quarter 2009 and first quarter 2010.
FSA Regulation - Meeting the Challenge
Ensure your your business maintains compliance with Financial Services Authority (FSA) regulations with the competitive edge needed in today's business environment.
Insurance Compliance Services Limited offer cost-effective solutions to help any firm authorised by the FSA to conduct general insurance business comply with the regulations. Our clients include Insurance Companies, Underwriting Agencies, Brokers and other insurance intermediaries, including Motor Dealers, Property Managing Agents, Travel Agents and third party administrators. We help them all to meet the challenge and maintain their FSA compliant status and, at the same time, ensure they have a competitive edge in today's difficult market conditions.
ICS have a range of services to suit your FSA regulation needs; from full hand-holding service through one-off consultancies to ComplianceExpert: our news and helpline service. We can provide support to an existing in-house compliance function, as well as audits (including coverholder audits) and health checks, due diligence and consultancy on specific regulatory issues. See our full range of services here.
Call us on 01892 539600 or email enquiries@insurancecompliance.co.uk
Skilled Persons Reports (Section 166 Reports)
The FSA can request an authorised firm obtain as Section 166 report from Skilled Persons as part of their supervisory regime. ICS have experience of carrying out such reviews in a timely and cost effective manner. Skilled Persons reports are being used more and more in the general insurance field. ICS approach the provisionof such reports in a way that may differ from some of the larger specialist audit firms.
We take time to ensure we fully understand the client's business. Our Consultants are all experienced insurance professionals, many of whom have held senior positions in insurance companies and brokerages. The ICS approach, as with the rest of our services, is to work closely with the client to ensure the outcomes are realistic and proportionate.
If you require a Skilled Persons Report please contact us.
Call us on 01892 539600 or email enquiries@insurancecompliance.co.uk
Outsourcing your compliance
Post Mag (12 March 2009) includes the pros and cons of outsourcing to consultants with comments from ICS’ Charles Maddocks.
One thing that all brokers have in common is the requirement to be compliant. No matter what their size, which business lines they sell, or which insurers they deal with, the Financial Services Authority clearly states that compliance is the responsibility of the broker. While larger brokers may have an in-house department that looks after the compliance regime, others of a smaller size may look to consultants to help them wade through the daunting array of the FSA's principles-based rules. A whole industry has emerged, comprising consultancy services dedicated to helping insurance brokers with their regulatory obligations. There is even a trade body now recognised by the FSA - the Association of Professional Compliance Consultants. However, the regulator states that using a consultant does not guarantee compliance; a broker cannot contract out its regulatory obligations, and small firms need to adhere to the principles just as much as any other firm. And the FSA means what it says - the insurance press is constantly reporting fines and disciplinaries imposed on brokerages and other insurance companies for compliance failures. The concept behind the regulation is quite sound and, in theory, the rules should be simple and easy to comply with. While these mandatory requirements were always going to import a cost to the market, the benefits should have justified it.
However, according to Denis Morgan, managing director of network Westinsure, some would argue that the regulation applying to non-investment business was introduced in "full metal jacket fashion" far too quickly, by an ill-prepared body, and by people who were unfamiliar with an insurance company's business. "Years later, many brokers (and insurers) are all still trying to get to grips with a hugely complex regulatory environment - and consultants have exploited the opportunity," he says. Angie Bryant, of Corylus Compliance Services, agrees that compliance can be complex: "Certainly, with the smaller insurance broker firms, it appears they have a general awareness that they may not be up to speed on all the detail the FSA might expect but really don't know how to go about getting there or simply do not place sufficient priority on it to rise to the top of their 'to do' list." She says the major benefit of using a compliance consultant is simply putting the regulatory requirements into language that brokers can understand. "If you compare the broking industry with the independent financial adviser sector, it is an industry that has not been regulated for a long time. It is no wonder that successful entrepreneurs who have built up a profitable business cannot get to grips with the FSA as it is not easy. Therefore, some companies feel they are operating in isolation - even if they do network with other brokers, they do not tend to talk in great detail about the way their business is run."
There is much consensus in the industry that the FSA's rulebook is complex and difficult to understand. Charles Maddocks, compliance consultant and marketing manager at Insurance Compliance Services, says his aim is to turn burden into benefit. "Brokers have come to accept that they have to comply with regulation, it is the 'how' they are regulated that is the tricky bit. The FSA's rules are complicated - especially as it has moved to a more principles-based approach, which has put the onus firmly on the individual. A good compliance consultant will not just work to ease a broker's peace of mind, they should be committed to improving the broker's business and establishing a positive input to the bottom line for clients."
Many brokers use compliance consultants. Some decide to use them at particular points, such as in preparation for an FSA visit, or to undertake or manage remedial action following a visit. However, an increasing number of brokers are using consultants for business-as-usual activities, such as new business reviews, financial promotions checking and ongoing compliance reviews or audits.
The FSA makes it crystal clear in its handbook that the broker is responsible for the overall compliance of its firm. So brokers must have appropriate systems and controls in place plus a full understanding of their compliance processes and monitoring arrangements, whether or not they enlist the help of a compliance consultant.
If you want to talk further about outsourcing your compliance function then we are here to listen to you on 01892 539600 or email enquiries@insurancecompliance.co.uk
Benefit not Burden
Insurance Times, in their ComplianceZone section, have printed a full page article from ICS on "Compliance - Benefit not Burden". To read the full article click here
Proportionate Thinking
Insurance Times, in their ComplianceZone section, have printed a full page article from ICS on "Proportionate Thinking". To read the full article click here
Get a grip of Client Money
Insurance Times, in their ComplianceZone section, have printed a full page article from ICS on "Get a grip of Client Money". To read the full article click here
Proving the system - Evidence
Insurance Times, in their ComplianceZone section, have printed a full page article from ICS on "Proving the sytem". To read the full article click here
ICS is a member of the Association of Professional Compliance Consultants (APCC).
This is the body for compliance consultants who advise firms regulated by the Financial Services Authority in the UK. The APCC is active in enhancing the professional standards of compliance consultants and is recognised as a trade body by the FSA. We subscribe to and actively support the Objectives and Principles of the APCC.