Regulatory Challenges in the Insurance Industry

Strategic Insights -

The insurance industry is grappling with issues of mis-selling by pension salesmen, highlighting the need for more effective regulation. A recent report by KPMG Peat Marwick found that most sales sampled had incomplete paperwork, but companies argue this does not necessarily imply that the products should not have been sold. However, customers may assume that salesmen were either incompetent or deliberately withheld information that could have scuppered the sale. This lack of trust has already led to thousands of people regretting their decision to buy endowment policies due to poor early-surrender terms.

Key Takeaways:

  • The Financial Services Act requires salesmen to obtain full details of a customer's circumstances through a fact-finding questionnaire, but companies are failing to meet this standard.
  • Insurance companies are trying to downplay the scale of mis-selling by citing incomplete paperwork, but this does not address the underlying issue of poor sales practices.
  • The Personal Investment Authority (PIA) has good intentions but insurers are not applying for membership in sufficient numbers, and the current system allows them a choice that may lead to ineffective regulation.
  • Companies are failing to train their salesmen properly, with poor sales methods being endemic in the industry.
  • Investors are losing confidence in the industry as a whole, and some are calling for an independent, government-backed agency to regulate the industry and protect consumers.

Statistics:

  • Thousands of people have bought endowment policies with poor early-surrender terms, leading to financial regret.
  • Insurance companies are failing to meet the standards set by the Financial Services Act, with incomplete paperwork being a widespread issue.
  • Only a small number of insurers have applied for membership of the PIA, despite its good intentions.

Sources:

  • "KPMG Peat Marwick report on mis-selling by pension salesmen" (no date or publication details provided)
  • "Story below" ( likely a print or online article from the same publication, but source details not provided)

Note: Due to the lack of specific source details in the original text, I have only listed the KPMG Peat Marwick report and a generic reference to a story below. If additional information becomes available, I would be happy to update this response.