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Face up to it!
Page 34
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Truck dealers offering warranties must register with the Financial Services Authority by 14 July or face stiff penalties,
including jail. Adam Hill reports.
From January 2005 anyone involved in the sale of financial services must be authorised by the Financial Services Authority (FSA) —but they must register with the FSA by 14 July this year.An EU Directive which comes into force next January requires every member state to enact these regulations; any company which fails to comply will have to stop offering these services.
From January 2005 anyone involved in the sale of financial services must be authorised by the Financial Services Authority (FSA) —but they must register with the FSA by 14 July this year.An EU Directive which comes into force next January requires every member state to enact these regulations; any company which fails to comply will have to stop offering these services.
From January 2005 anyone involved in the sale of financial services must be authorised by the Financial Services Authority (FSA) —but they must register with the FSA by 14 July this year.An EU Directive which comes into force next January requires every member state to enact these regulations; any company which fails to comply will have to stop offering these services.
These rules affect what the FSA calls the "secondary" market: people like truck dealers for whom insurance is not their main business, but who are selling, say, gap insurance and warranties."People need to read our guidance and factsheets, particularly Factsheet Numbers 5 and 8,"says Robin Gordon-Walker of the FSA. "The motor industry is very much drawn into this, whether you are in truck hire, a dealer, freight forwarder or removal company. If you're providing some kind of warranty service, you are potentially involved."
The FSA expects a rush from worried companies during the summer, so the sooner you register the better.
At the beginning of May this year the FSA had received some 5,000 applications from firms seeking authorisation to carry on general insurance business; several hundred were from the secondary market. While this indicates that people are getting the message, the FSA is worried because a number of common mistakes are recurring in filling out the form and this is delaying the registration process. This might be stating the obvious, but you should read the form carefully before you begin, including the instructions and guidance. Look up cross-references and, most importantly, don't try to complete your application
in a hurry Most mistakes can be easily avoided if you take your time and read through your answers before you submit your application. For example, in the application fees section, firms aren't noticing the "000" outside the boxes on the questionnaire, with the result that they inflate their income by a factor of 1,000. If your income is £500,000, for example, you
should complete the box with "500"; otherwise you will find your fee calculated on an income of £500m! For a full list of tips to avoid such errors, see panel (below left).
But there are alternatives to registering, Gordon-Walker explains: "You can become an appointed representative of an intermediary [a broker] who becomes authorised by us. You become part of a network and they take responsibility." While insurance is already regulated, the General Insurance Standards Council deals only with brokers, so hauliers will be more protected from unscrupulous providers when the new law comes into force.
If you are not going to register with the FSA, you can follow a couple of other courses (see panel) which will allow you to keep an interest in general insurance. But companies which fail to comply face prosecution and fines, and the time to sort out your business is fast running out.
Anyone tempted to bury their heads in the sand should note that there will be no limit on fines for companies which trade illegally. "It's a criminal offence to be doing unregulated activity," says Gordon-Walker. "People have been prosecuted, particularly in areas such as illegal deposit-taking." While injunctions are the normal route taken by the FSA against rogue traders, there are more punitive options: "Courts decide the fine and, in more persistent cases, people have been sent to prison." Registering costs a bit of time and will set you back £1,000 or so. Annual fees for being FSA-registered will depend on how much insurance business you do — in many cases they will be just a few hundred pounds a year. The only alternative will be to stop providing any kind of insurance services at all. •