“The ability to show the robustness and quality of your systems and processes, and how above regulatory changes you are coming, is going to be crucial here.”
At our recent ‘Breakfast with Stuart’ meeting, IP coverage was again discussed in terms of the continuing difficulty many companies have in securing it, justifying the costs involved, and the approach that insurers seem to be taking.
Annual renewal letters have come through the doors recently and they don’t make good reading for many companies, with premium levels being increased while at the same time there are an increasing number of exclusions presented in policies which make capital release activity even more important. more delicate.
Of course, you have no choice but to make sure you have IP coverage and, with major changes to the regulatory structure on the horizon in the form of the Consumer Duty proposals, this can be a channel very difficult to navigate.
I have been told that insurers already refer to the consumption obligation in their correspondence with companies, asking what is being done at the company level to ensure that these proposals will be immersed in the company, in particular around the proposed emphasis on the continued provision of advice and maintaining consumers will be adequately served in the future.
You can understand the insurer’s reason for this – they want to be sure companies won’t be hit by a wide range of potential complaints years after advice has been provided, and there’s a real need for debate here as to the extent to which a company may be responsible for events in a client’s life that could not be perceived at the time of the advice.
In my opinion, this is difficult ground. Again, you can understand why the regulator would want to keep companies on a leash for “future customer events” because it gives them a permanent entity to complain against.
But, from my perspective, companies can only provide advice based on their client’s needs and circumstances at that particular time, and if they change drastically at a later date, then it seems entirely unfair that the advisor/company should be held responsible for this.
Of course, advisors should point out what the responsibilities of the stock release product are and what that might mean in the future, but again, that doesn’t mean that advisors should be expected to be clairvoyants or soothsayers. regarding their client’s future.
However, from an IP perspective, this appears to be a direction of travel that is being followed, with companies potentially having to guess what might happen in the future and how they would react, in order to ensure the coverage they don’t. can’t afford. to live without.
For individual advisors and businesses, the ability to show the robustness and quality of your systems and processes, and how up-to-date you are with upcoming regulatory changes, will be crucial here.
The Equity Release Council will soon be launching its new standards, and I urge all member firms to take advantage of them, as they will no doubt be useful in showing what you are doing to mitigate risk. We will be hosting a webinar on the new standards, which I again invite you to attend to see what they are and how companies can seamlessly integrate them into their business.
Standards tend to go beyond what is required at the regulatory level, and just showing that you are on the Board can be a positive tick in the box in terms of what insurers want to see.
However, it is undeniable that the costs of IP cover continue to rise – there is often a limited pool of cover to be had, and the companies that can prove they operate to the highest standards will be the ones to secure this. will be (hopefully) a competitive and sustainable bounty level.
You may feel like you have to jump through hurdles, but unfortunately that’s the nature of our market, and since this is a non-negotiable item, the consequences of not getting coverage are not not worth considering. Put yourself in the best position to make sure this never happens.