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2-year fixed churn under the microscope

Sarah Davidson

September 20, 2012

Ray Boulger, senior technical director at John Charcol, said: “If the broker has a product mix that is substantially different to the average spread of products sold and that is happening consistently then it is perfectly reasonable for the regulator to look into this.

“The broker may be specialising and the client’s needs may be specialist, but the other reason is that they are selling a 2- year rate regardless of the client’s needs so they can call them again when the deal expires.”

Boulger’s comments come after Martin Wheatley, managing director of the FSA, said in a speech to the Association of British Insurers that the new Financial Conduct Authority would “shoot first and ask questions later”.

Wheatley added:“We’ll be expecting some firms to change their culture and the way they view consumers. Firms must balance the way products are developed and sold in the right way against making profits.

“As we prepare to become the Financial Conduct Authority, we have to learn from the FSA’s experience with many product mis-selling issues, where problems have often occurred when products designed for a specific market were sold widely to other people.”

Although Wheatley was referring to the mis-selling of savings products to pensioners, Boulger said this could easily be applied to selling a short-term rate to a client who needs long term stability.

Meanwhile Eric Galbraith, chief executive of British Insurance Brokers’ Association, said when it comes to general insurance the regulator should target it’s intrusion at the problem areas “such as lenders and other organisations whose main business is not insurance”.

And he added: “I believe there is an opportunity for us to work together with the regulator to demonstrate and acknowledge the low risk that our sector presents, and even help to point the gun at any appropriate areas or issues. Our sector has reputational concerns and just like the regulator we don’t want to see problems in the future.”


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