Norwich Union is strongly urging motor traders to act now or face being forced to withdraw from selling financial service products.
Norwich Union is strongly urging motor traders to act now or face being forced to withdraw from selling financial service products.
New legislation effective from 14 January 2005 will make it illegal for any business to sell general insurance products without being authorised by the Financial Services Authority (FSA).
Barry Hogg, motor trade manager at Norwich Union, explains: "This legislation is set to hit the motor trade sector hard, as a significant proportion of its business profits come directly from selling financial services products such as creditor/payment protection, gap insurance, warranties, motor insurance including ‘free’ deals and breakdown cover.
"Motor traders, particularly within the franchised sector, will have no option other than to seek authorisation and comply with the new terms. Opting out of selling financial services is likely to jeopardise the future of many such businesses.
"The cost of compliance for a typical franchised dealership is likely to reach between Ł20k - Ł30k depending on the size of the business and the number of sites. For larger operators, the costs could run into hundreds of thousands, possibly millions, of pounds per annum.
"The new legislation will add significantly to the cost of training staff and will make staff retention in this notoriously transient sector more important than ever. Dealerships will be forced to invest in training all employees involved in providing financial services, whether through direct selling or in an advisory capacity."
FSA authorisation and ongoing compliance will place a significant cost burden upon the retail motor trade sector as a whole. Estimates suggest this could reach Ł300M per annum once all the cost elements are taken into account, including the application fee, establishing a training and competency framework, an authorised person registration fee, taking out professional indemnity insurance and becoming a member of the Financial Ombudsman Service.
Application packs are available now and applications must be submitted to the FSA by 13 July 2004 for guaranteed processing by 14 January 2005.
Motor traders should contact their usual insurance advisor – who will also be required to comply with this regulation – for further advice and guidance.
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For further information, please contact:
Alison Owen at Staniforth on 0161 274 0100 or David Ross at Norwich Union on 08703 66 68 65/07786 526350.
Notes to editors
- Norwich Union is the UK's largest insurer with a market share of around 14 per cent
- With a focus on insurance for individuals and small businesses, Norwich Union insures:
- - one in five households
- - one in seven motor vehicles
- more than 800,000 businesses
- Norwich Union products are available through a variety of distribution channels including brokers, corporate partners such as banks and building societies and Norwich Union Direct.
- Norwich Union’s news releases and a selection of images are available on the Aviva internet press centre at www.aviva.com/media.
- An ISDN facility is available for studio quality broadcast. Call the press office on 08703 66 68 68
For all life & pensions media enquiries 08703 66 68 73
For all other media enquiries 08703 66 68 68