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FSA compliancy issues: Authorized but still not compliant

It has been described by some as “a sledgehammer to crack a nut”, but the FSA has a purpose – to regulate the insurance industry and to protect consumers from being sold the wrong products.

The question is: are authorized dealers fully complying with the FSA’s requirements? According to industry experts, many of them are not.

“We have been carrying out mystery shopping and audits on dealerships and are finding a lot of authorized dealers that are providing compliant products but are not actually complying with the regulations themselves,” says Stephanie Murdoch, managing director of FSA compliance company Auto Network UK.

“I think that dealers have a long way to go to be fully compliant and we have identified a number of shortfalls in the sales process. Many are confused about what documentation they need to complete.”

There still seems to be uncertainty in the industry about the regulations, particularly in terms of reporting. The responsibility for communications lies with the FSA but often it appears that dealers aren’t willing to help themselves.

“The FSA provides a lot of guidance and support on its website, but many dealers have never even visited the site, despite the fact they can register with firms online to receive regular communications from the authority.”

#AM_ART_SPLIT# Murdoch believes that 50% of dealers are trying to achieve compliance, but that the rest are simply ignoring the regulations altogether. It’s a worrying statistic and one that could undermine the whole purpose of the regulations.

“There was a big focus on the regulations leading up to January this year and as a result many businesses were taking it seriously. In the six months since, many have taken their eye off the ball,” says Charles Hank, operations coordinator at industry training specialist Autavis. “The importance of top down management cannot be underestimated if we are to effect real culture change.”

According to Hank, some dealers have done little in terms of compliance since receiving their permission to carry out regulated activity and are still getting to grips with the implementation phase. The reporting requirements appear to be causing the most confusion at the moment.

“Complaints, for instance, need to be reported by dealers in April and October for the six months previous. Given that regulation came into force in January, many are confused as to when the first report is due. I think that while everyone feels more at ease with the subject of FSA, there is still a general consensus that we need a clear and unequivocal message by the FSA so that we may establish some key benchmarks.”

Consumers should be seeing a positive effect from the regulations; that is if dealers are complying with them, of course. It is also an opportunity for retailers to promote professionalism in the showroom, which should lead to greater consumer confidence, not just in the insurance business, but the whole sales process.

#AM_ART_SPLIT# “Those dealers that have accepted FSA are seeing a positive increase in their insurance business performance and those that have not embraced are seeing a decline,” says Tim Heavisides, chief executive of Car Care Plan. “It is taking time to bed in but the service offered to consumers is improving. Dealers can now qualify insurance needs more effectively than before to all customers, not just a select few.”

Those dealers that view the FSA regulations as an opportunity rather than an obstacle can also use it to their advantage, not only helping to sell cars, but to breed customer loyalty.

“Customers are certainly noticing the difference. In my capacity as a consumer I recently helped a relation buy a new car from a local BMW dealer, JCT600, and it was absolutely brilliant,” says Heavisides. “They talked to me about the regulations and gave me all the paper work I needed. This is a prime example of how regulation should be. It should not be overpowering and shouldn’t damage the industry’s opportunity to develop business.”

#AM_ART_SPLIT# Products warrant attention

Warranties that are underwritten by insurance companies have also been affected by the FSA regulations. This has proved to be an opportunity for businesses that supply warranty services directly to dealers.

Lawdata warranties are self-funding schemes that the company says are flexible, easy to manage and simple to understand. As they are not provided by an insurer, they don’t come under FSA regulations.

“The unique element about Lawdata Warranty services is the absence of any middleman. This can only be good news, putting both the profit and control back firmly in dealers’ hands,” says Graham Jones, CEO of Lawdata.

Lawgistics offers similar warranty services and believes that, despite the FSA regulations, their products have a strong selling point.

“The cost of our warranties is much less as there is no need to pay for an insurance policy, while servicing can be carried out at the dealers’ own premises or at a nominated garage,” says Dennis Chapman, director of legal services at Lawgistics.

“There is also no issue in terms of having to fight your corner over making claims as it’s down to the dealer. It’s a simple proposition – we have found that clients caught by FSA are encountering a lot of paperwork, bureaucracy and costs.”

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