News Review: General Insurance


Landmark ruling could spell trouble by


Jason Berry, head of key accounts, Uinsure


Te New Year has started on something of a sour note for advisers following a land- mark ruling but fear not as increasing general insurance sales could provide an an- swer. Already faced with spiral-


ling professional indemnity cover costs advisers are now worried they could face po- tential litigation from cus- tomers aſter a High Court ruling opened the gates for investors who accepted the maximum award from the Financial Ombudsman to pursue their advisers for more money. Te


ruling surrounds a


couple that claimed they in- curred losses of £500,000


following endowment mis- selling. Te FOS has awarded the


couple the highest maxi- mum payment (at the time) of £100,000 but a judge has since ruled the couple can claim further damages from their adviser.


“Building trail incomes can provide you with steady, additional income to cover both fixed and unexpected costs” It’s a worry advisers could


do without, especially in the current climate but it seems to me the best way to deal with such a worry is to al- ways have a back-up plan for situations such as this.


Building trail incomes can


provide you with steady, ad- ditional income to cover both fixed and indeed unex- pected costs. Typical first year earn-


ings for an adviser could be around £16,800 (based upon five weekly sales over a 12 month period, each with a monthly premium of £25 and earning 27.5% commis- sion) but effective renewal persistency can see this reach nearly £70,000 in year five – even if no new cases are sold. In business, as in life in


general, the unexpected can catch us unawares and with- out an adequate back up plan the consequences – as may well be the case for the adviser at the centre of the court ruling – could be dire. Ignoring the opportunity to develop a steady income is a risk few of us can afford to take.


We’ll have to wait while the RDR beds in


With the RDR seeing more advisers focus on high-net worth I can’t help but wonder who’s going to service the gaps? It’s widely accepted that, following the


problems of the last few years, the number of people recognising the value of good advice is soaring. Of course, thanks to the RDR the “value” of that advice may be out of some people’s reach.


With advisers having to charge for advice many will be tempted to look to more upmarket clients in order to ensure their clients can afford the fees. It’s understandable that advisers want to ensure their charges can be met but where does that leave those people who can’t afford to pay for advice? With times hard for everyone – and more cuts on the way in 2013 – not all consumers


14 MORTGAGE INTRODUCER JANUARY 2013


are going to be able to pay. That doesn’t diminish their need for advice of course. So what will they do?


The risk is consumers may be forced to try to do their own research and apply their own solutions, which could turn out to be poorly informed and not fit for purpose. This could lead to disastrous circumstances, especially for those who are already short of cash. I have read some industry experts suggesting client sharing may be the answer - whereby experts in different fields will both advise a client on their different needs and share the one fee but one wonders how many advisers will go for that? It is a situation in which we can only take a ‘wait and see’ approach with as we watch the rest of the effects of the Retail Distribution Review take hold.


Making Census of it all


There were some interesting findings in the recent 2012 Census report, including the fact the number of mortgage holders was down 6%, the number of people owning outright was up 2% and the number of people renting privately was up from 9% in 2001 to 15% in 2011. There was also a warning for the industry. The Census revealed the UK population is up 7% and now stands at over 56 million. At the same time house building is at an all time low. It’s obvious then that house building needs to keep pace. While many of the government and developer schemes for first-time buyers – such as FirstBuy - have attracted criticism for only applying to new builds these schemes at least will hopefully help kick-start the house building market.


Premiums certain to rise in 2013


It’s been quite a year for the insurance market. After much speculation and preparation, the RDR has finally come into effect and it’s reverberations are already being felt. The EU’s gender directive has changed the way insurance products will be priced forever. And then of course there’s the torrential rain that hit much of the country and David Cameron promising to take a tough approach on negotiations with insurers over homes in danger of flooding. It doesn’t take a genius then to predict that in 2013 home insurance premiums will rise.


www.mortgageintroducer.com


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