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FSA insurance rules a ticking timebomb

The Financial Services Authority has planted a legislative timebomb under the UK's franchised dealer sector, the chairman of the Society of Motor Manufacturers and Traders warranty committee is warning.

Tim Heavisides, also chief executive of warranty provider Car Care Plan, says the industry has not been given sufficient time to prepare for the new, strict regulation of the sale of motor insurance products from January 14, 2005.

And he fears small and independent dealers struggling to meet the FSA's authorisation requirements may step outside the legislative framework to find unregulated, riskier solutions.

The deadline for applications to the FSA is July 13, 2004. Effectively, this means there are 42 weeks left for retailers to decide what to do, send in the necessary paperwork, train staff, receive authorisation – or develop an alternative.

“This is a timebomb ticking away,” Heavisides told Sewell's Used Car Conference 2003 'Driving Profits'. “There's every likelihood the FSA will see the direct opposite of what it is trying to achieve because it is incomprehensible that dealers who are not authorised will want to give up that profit centre. Instead, they will be looking for creative alternatives.”

He believes all major motor groups and most franchised dealers will have the means to become authorised – a fact confirmed at the conference by CD Bramall's group training and development manager Alan Smith who said the company had commenced training its business managers towards FSA authorisation.

Many smaller retailers will elect to become appointed agents under the regulation, although Heavisides says some insurers, manufacturers and warranty companies may not wish to take responsibility. Those dealers without approval or agency status could turn to a non-regulated environment, leading to less consumer protection and a reduction in consumer confidence. A further complication is that while the deadline for applications is July next year, the FSA has only just issued consultation papers.

“The FSA's precise intention may not be confirmed until the 11th hour, by which time it will be too late for an effective response,” says Heavisides. “Meanwhile I can only urge dealers to get this matter on the radar screens, raise it with their providers and get feedback. “If the trade understands the issues it will be so much easier to find the solutions.”

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