Appointed Representative

[Legal Services]

Our client is the leading company in the Sky digital warranty market and has been selling its own breakdown insurance type product on domestic Sky digital systems for over 10 years. They have their own digital engineers and service all their customers themselves.

This market sector was looked at by the FSA's perimeter guidance team in 2008 and was not deemed to be a regulated product and so FSA authorisation was not required for it. However, we believe that the FSA may be reappraising their earlier decision and so our client is now seeking to become an appointed representative of an FSA authorised company.

Can anyone suggest who our client should approach about becoming an appointed representative?

We would be glad of any information.

[davidmd]

You say insurance "type" guarantee. Is it an actual insurance policy underwritten by an insurance company or offered out of their own funding ? This is the fundamental decider as to whether they are involved in providing insurance.

For an insurance broker taking on an Appointed Representative is extremely onerous - other than an Introducer Appointed Representative.

My first step would be to seek legal advice from a lawyer experienced in FSA matters.

[James Sharp]

Yes, I think that I may have spoken to the company in question a couple of weeks ago, because they probably found us via Google using "Insurance Appointed Representatives"... or something similar. This is not the first time we/I have heard from somebody that effectively offers a hardware installation and maintenance service and who thought - or had been told - that they might have to be FSA regulated.

Anyway, this sort of thing is not what we do and, quite apart from that, it ain't insurance! This was my response, but I nevertheless thought that the company in question was a perfectly respectable, honest, mediam/large and long-term business in their field.

So, if we are talking about the same entity, then they are a hardware (dish) installer that offers an optional annually renewable maintenance contract paid monthly by DD. They didn't particularly want to become an insurance intermediary, but were being bounced into it... as it seemed to me.

This is not insurance, or, if it is, then every other type of hardware or software seller/installer/maintenance company is also in insurance too. OMG! If you were all wondering where the next PPI type event was going to come from? Then this is it!

The said Company X, were under pressure from the other large competitor in their market that had recently turned the 'maintenance' product into an insurance guarantee type product - doubtless backed by some idiot underwriter in Gibraltar . Having done that, Y were claiming the X were not a reputable alternative, because they were not FSA regulated, as Y had become.

So, what do you want to bet that Y were in some difficulty? But, with good marketing, they have possibly transformed their maintenance contract into a three year insurance guarantee, paid monthly by DD; which is cheaper over the three years than X or Y had previously charged on a monthly basis for maintenance. Net result, Company Y pockets 18 months of normal earning up front and idiot underwriter thinks he has got a good deal.

Having come from an insurance software house background myself - from 1986 to 2003, I remember this scam. In the late 80s and early 90s there were hardware maintenance companies and insurers offering this sort of deal and, even amongst MCS users, the most stupid went for it. Obviously, it all fell apart, depending upon the maintenance company and/or the insurer within a 12-24 months period. Fortunately for the non stupid, this was before regulatory and compensation schems had been introduced.

So, my advice to Company X is 'tough it out'. My warning for everybody else is... many more companies than Y will jump on this particular bandwagon, with the consequence that the likes of you and me will pick up the tab in due course; because the FSA will see it as more fees and the FSCS will pay... anything... whatever.

[Mike Cranny]

I think this is the company that contacted me.

Warranties on white goods, TV's and computers have been a problem for years. You buy a warranty which is the retailer's promise to service or repair your equipment and they go bust and your warranty is worthless.

If it is insured it is still worth something. One Lloyd's underwriter wrote these twenty five years ago, and lost so much money he committed suicide - jumped of a cliff.!

The technical bit is that the courts have never defined what insurance is,so PERG 6 .7 gives some vague clues.

In short if you give a promise that you will do something in return for money, and take the risk of loss from the client, that is insurance.If you re-phrase it - best endeavours- it isn't.

In this case the company may need to sell and insured product or at least be authorised to compete.

Being an AR is an easy route to market, but the burden on the Principal is heavy. It comes down to how much money can be generated, and can the risk be contained.

If the reward for the Principal is satisfactory, and the product is insured, I can possibly find someone who would look at it.

[andrewtj]

Was offered one of these the other day by a cold caller - they were going to charge £8 a month. Surely not good value because if the box packed up I could just cancel my subscritption and take out another one and pick up a box for free . . .

[davidmd]

and ...... your contractual notification period for cancellation is ?????

and ...... how are you paying your subscription ? If by DDM all well and good but if your payments are a recurring card payment be aware these are a swine to stop. YOU cannot stop a recurring card payment - only the company collecting the money can stop it.

[andrewtj]

30 days notice and yes paying by direct debit. My life insurance isn't much more than that!

[TimDawson]

I have absolutely no idea about the product in question but our firm is an AR of a FSA regulated firm in the same product line. It made sense for us to go with this brokerage because of the product overlap so looking to other large sellers for the product is one way to approach the AR possibility. There are also other firms out there that specialise in being an AR and have permissions for many types of policy so they would also be worth contacting, have a look in Google.

[Mike Cranny]

Hello Tim,
I think the problem is that they can't find a network that will appoint them as an AR, in view of the unusual nature of the business.

AR networks tend to specialise - either for agency/provider reasons or supervisory/training reasons.
This is a form of warranty and can either be classed as insurance (in which case it needs to come with insurance, and they need to be authorised or an AR to distribute it) or an uninsured product, in which case it needs to be structured as such, and not claim to guarantee protection.

Uninsured warranties can be more difficult to sell, because if the firm cease to trade (and some have) you lose your money

[TimDawson]

Originally Posted by Mike Cranny

This is a form of warranty and can either be classed as insurance (in which case it needs to come with insurance, and they need to be authorised or an AR to distribute it) or an uninsured product, in which case it needs to be structured as such, and not claim to guarantee protection.

Uninsured warranties can be more difficult to sell, because if the firm cease to trade (and some have) you lose your money

Thanks for clearing that up Mike, there seems like a quite a large grey area with warranties.