The Financial Services Authority (FSA) was established by the Government (HM Treasury) in 1997 to provide a single ‘super’ regulatory body for the financial services sector, comprising, for example, banks, building societies, life and general insurers. Until now the FSA has not regulated the activities of general insurance intermediaries or general insurers’ conduct of business (although insurers have been subject to government regulation in respect of their capital,
solvency and fitness of senior management for many years).
The trigger for the extension of FSA’s responsibility to include the general insurance business is the UK’s adoption of the EU Insurance Mediation Directive (IMD). The Directive is intended to complete the single European Market in financial services by enabling insurance intermediaries to transact business across the EU if they so wish.
On the 14th January 2005 the UK will implement the Insurance Mediation Directive and the FSA will take over responsibility from the General Insurance Standards Council (GISC) for regulating the activities of insurance intermediaries and insurers. The FSA has broad powers to make rules, conduct investigations and enforce both the law and its own decisions.
The FSA has four statutory objectives and these are to:
- maintain confidence in the UK financial system
- promote public understanding of the financial system
- secure the right level of protection for consumers
- reduce the potential for financial services to be used for financial crime.
Insurance intermediaries, insurance companies, or anyone else engaged in Insurance Mediation activities must be registered with the FSA and must meet certain minimum requirements. They must:
- possess appropriate knowledge and ability as set out in the regulations
- be of good repute
- hold professional indemnity insurance
- hold sufficient assets to protect customers against failure to pass premium to an insurer (or transmit monies paid by an insurer to a customer).
So why should this matter to you?
If you are a Local Authority or a Housing Association, registered under the Housing Act 1996 or the Housing (Scotland) Act 2001 and are therefore incorporated in the registers maintained by the Housing Corporation or Scottish Homes, you are specifically exempt from the Act. However,
if you are not registered and you are engaged in assisting others, such as tenants, in the purchase of insurance, premium collection or claims handling, even if this is only done in a small way, then it is likely you will be affected by the regulation. You will need to ensure you have clarified your status with the FSA, or registered with them direct, or cease any activities that fall under the terms of the Act by the 14 January 2005. With effect from this date, Zurich Municipal is not permitted to trade with unregistered agents except where an exemption is granted by the FSA.
The FSA can be contacted on 0845 605 5525. Alternatively visit the website:
http://www.fsa.gov.uk/mgi/
Agency Status
As an Insurer, Zurich Municipal must be able to demonstrate to the FSA that we are managing all our agency relationships, regardless of the status of the organisations with which we are engaged. If you arrange insurance contracts between Zurich Municipal and other parties, such as lessees, shared owners or tenants you are acting as an agent of Zurich Municipal. In these circumstances we require a Terms of Business Agreement (TOBA) to be introduced.
If you are ‘exempt’ from the FSA Regulations, as an Insurance company it is still important that we can identify those carrying out insurance mediation activities on our behalf, regardless of status. To this end therefore, you should already have received a 'Notice to Policyholder' which
formalises your agency relationship with Zurich Municipal. This will form part of your policy documentation and takes effect from 1 January 2005.
This enables us to consolidate our existing ‘agency’ relationship with you, which is explicit in terms of existing policy wording but also implied in terms of the insurance mediation activities you are already carrying out on our behalf. It is important for your own protection that we should both be clear over the extent of our relationship and authority and we can demonstrate this to the FSA. The terms and conditions of your policy are not affected by the ‘Notice to Policyholder’ as we are taking this action to consolidate and safeguard your interests.
We should already be aware of any insurance mediation activities your organisation conducts. The method for managing these activities will have been expressly agreed with you in the terms of your existing policy.
Important Messages
Any documentation issued by Zurich Municipal, including policy documents, must be clear, fair and must not mislead. Whilst all documentation is kept under constant review, if you consider any of our documentation fails to meet these criteria, please contact your usual Zurich Municipal
representative.
Where appropriate, we would prefer to communicate by electronic means, and certain vital information required for providing or continuing cover may be requested in electronic format. If this causes any difficulty, we will work to consider alternatives with a view to achieving a mutually satisfactory outcome.
Whilst we always endeavour to deliver a high quality of service we recognise that very occasionally things may go wrong. If you have any cause for complaint, you should in the first instance call or write to either your normal Zurich Municipal representative or the office that issued your policy. Please quote the details of your policy (your policy number, your name, your organisation’s name). If the matter is not resolved to your satisfaction, the formal complaints process (which does not affect your legal rights) is detailed in your policy document.
