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Insurer's compliance challenges and the effect on advisers

Those insurers that distribute primarily through advisers are being challenged to ensure that their products are suitable for their clients. While suitability is not intended to mean everything financial advice means, any requirement to assess suitability is going to affect advisers in one way, or another. One aspect of suitability is eligibility - and we're not just talking about a client being old enough to purchase the contract. While 'hard' rules such as age of entry requirements are enforced by insurers, 'soft' rules such as whether a client would be eligible to claim under certain circumstances (such as some income protection scenarios for self-employed clients) have usually been left with the adviser to work out with the client, with the occasional intrusion of the underwriter. Other issues, such as assessing whether an applicant can afford the product, or is vulnerable to pressure, and may therefore require additional help, add complexity.

If one outcome of conduct review work is that enhanced management of these issues is required, then insurers must decide whether the work can be carried out by advisers, or if they must make all the assessments themselves. Either way, advisers will feel the effects. Additional information may need to be collected. Further checks - calls perhaps from the insurer to the client - may be required. The requirement to consider suitability throughout the life of the contract could place the insurer in the position of flagging up the issue of suitability problems. The extent to which the adviser is involved in these tasks may vary - but like it or not, there will be an effect on the relationship. 




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