The Financial Services Authority (“FSA”) published a consultation on 8 June 2011 on guidance for selling general insurance policies through price comparison websites. The guidance can be viewed here. The guidance relates to firms who sell regulated insurance products and services online both through price comparison websites and “white-label” websites.
The FSA’s guidance is the result of thematic work conducted between June and September 2010 which looked into how firms sell insurance online. The conclusions of the thematic work were that there was a lack of understanding within the insurance industry about what regulated activities were being conducted by firms selling insurance online, and that this has consequently led to a number of failures to comply with FSA rules.
The FSA had concerns in three areas:
- Potential breaches of the general prohibition and restrictions on financial promotions
The FSA considers that firms who use price comparison tools are likely to be carrying out the arranging activities under Articles 25(1) and 25(2) of the Financial Services and Markets Act 2000 (Regulated Activities) Order (“RAO”), and may also be advising on insurance under Article 53. In addition, firms that use a third party’s price comparison tool on a white-labelled basis may also fall within Article 25(2).
- Non-compliance with the FSA’s ‘Insurance: Conduct of Business sourcebook’ (“ICOBS”)
As firms tended to consider that they were merely ‘introducing’ customers to authorised firms, the FSA found that they had not complied with the FSA’s ICOBS requirements. In particular, those requirements relating to customer eligibility, status disclosure, suitability of advice, statement of demands and needs and ensuring that customers buy policies under which they are eligible to claim benefits.
- Non-compliance with the ‘Senior Management Arrangements, Systems and Controls sourcebook’ (“SYSC”)
The FSA was keen to remind firms that SYSC gives them a responsibility to have policies and procedures in place to ensure compliance with the FSA rules and to counter financial crime.
The FSA has also written to firms who sell general insurance policies through price comparison websites, and asked them to ensure that they have appropriate regulatory permissions (or ate otherwise exempt) for the activities they carry out, ensure that they only enter into contracts with firms with appropriate regulatory status, review their sales documentation to ensure it complies with FSA rules, and establish appropriate systems and controls to prevent breaches of the appropriate FSA rules.
The FSA invites comments on the consultation until 8 August 2011.