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FSA retracts trade criticism

The Financial Services Authority has back-tracked on a statement issued yesterday claiming the motor industry is the most ill-prepared sector for new regulation on the sale of insurance and warranties from January 14, 2005.

It admits that while 2,900 vehicle retailers and 100 car hire firms had applied for authorisation by December 3 (the latest update), those figures may not necessarily mean automotive lags behind other regulated general insurance sectors – despite strong words of warning directed at dealers by Sarah Wilson, director of the FSA’s High Street Firms Division.

In her January 8 statement, Wilson says: "We are extremely concerned to see that the motor industry is lagging behind in the run up to regulation. Dealers and hire firms must not think this legislation is not relevant to them.”

But today, an FSA spokesman says: “Motor may not be the worst prepared – it’s just that the numbers are bigger. There could be smaller sectors with a smaller shortfall in terms of numbers, but that may be a higher percentage.”

However, he also concedes the authority is unsure of the size of automotive retail general insurance market, as it did not have the quality of information to which it was accustomed from the prime sector.

Just under 600 dealer groups of varying sizes operate in the region of 4,000 franchised outlets in the UK, with a further 2,000 owner-driver dealerships making up the franchised sector. There are also approximately 11,000 independent VAT-registered vehicle retailers selling more than 100 cars each a year.

When AM asked for a breakdown of the 2,900 applicants, the FSA spokesman said the authority did not differentiate between franchised dealers and independents, but insisted that the number of dealers that had applied for authorisation fell short of original estimates of the size of the regulated market by about 1,000.

AM’s research suggest the bulk of the 2,900 applicants quoted are from the franchised sector, along with a few car supermarkets and a small number of higher volume independents. Our information is also that a significant number of smaller groups – those with a handful of outlets – will have made just one application to cover all sites and with appointed representatives (ARs).

Most AM100 listed groups will have submitted individual applications for each of its outlets.

If that is the case, then the FSA’s 2,900 figure would be close to covering the whole of the franchised sector and major independents who offer warranty and insurance products.

Meanwhile, the FSA is warning that applicants should not assume that becoming an AR is a quick route to ensuring they are operating legally by January 14. There is a process for principals to notify FSA of new ARs, and it is advising firms wishing to take this route that they should do so as soon as possible.

A fully completed application form is required by the FSA. Applicants can contact 0845 6055 525 to request one or apply online via the FSA website at www.fsa.gov.uk/mgi/authorisation_homepage.html. The authority says it is contacting all motor industry firms who have registered but have not yet applied for authorisation with a reminder of the short timescale for action.

Wilson says: "General insurance companies can help themselves and the authorisation process by re-doubling their communication efforts to the secondary intermediaries they deal with.

"Our data shows the most effective prompt for registrations from secondary intermediaries follows contact from their product providers reminding them they won't be able to accept business from unauthorised insurance intermediaries after January 14."

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