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Confusion on new FSA rules

Automotive retailers confused and concerned about how to apply for permission to continue selling insurance-related products from next January will receive little assistance from the Financial Services Agency.

Eleanor Linton, head of the FSA's policy and technical standards department, says: “We expect companies to form their own view about what they should do. Some people phone us, but as we expect another 20,000 applications, we can't tell every firm what they need to do. Our website and fact sheet are as far as we can go on offering help.”

Linton was speaking at Forbes House, headquarters of the SMMT, to an invited audience of industry executives with a special interest in FSA compliance. The debate was sponsored by Auto Network.

Difficulty in using the FSA website, and problems for small firms trying to complete the form, were voiced during the debate. Linton says the July 13 deadline for applications, to ensure authorisation by January 14, 2005, is “immovable”. The FSA is not threatening to close dealerships through non-compliance, but does have wide powers, she says.

Panel member, Robert Lindley, Mazda head of dealer development, pointed out that there is confusion over what is “insurance”.

Linton says: “We won't accept firms Tippexing out the word. If it looks and behaves like insurance, then it is. If people try to get round compliance, they run the risk we will find out about it.”

She says bodyshops do not need to comply if they merely offer an insurer's leaflets, even if the repairer's details are stamped on it. They will have to comply if they recommend the insurer, or offer advice. Charles Meade-King, a solicitor and compliance consultant, who was on the panel, says: “Firms can only do their best when applying. They should not be frightened.”

Another panellist, Louise Wallis, RMI business development consultant, says: “The form is difficult for small dealers to understand and needs to be simpler. The last thing they want is to act against the law but it is difficult to sell cars without offering insurance and warranties.”

Linton put the cost of compliance at an initial £2,000-£2,500 followed by £3,000-£5,000 a year. Others at the debate believed the annual cost could be as high as £10,000-£15,000.

Martin Fehrmann, managing director of Insurance Solutions at DaimlerChrysler Services, who was at the debate, says: “For many small dealers, it will be the end of the road. They will need professional help to comply, and the costs will be too high.”

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