Exclusive: Insurers that have complicated distribution models are failing to maintain accurate records of policyholders, the CEO of the Financial Services Compensation Scheme has warned.
The FSCS is working with the Financial Conduct Authority and the Bank of England on ensuring that capacity providers maintain data on all their policyholders.
The guarantee scheme was faced with significant “complexity” in identifying policyholders of collapsed insurers Enterprise, Gable and Alpha, CEO Mark Neale told Post.
“It’s a widespread issue, where insurers are operating through networks of brokers and sub-brokers,” said Neale.
“We have found with Enterprise, Gable and Alpha, that – within those circumstances – it can be hard to reconstitute reliable information about all the policyholders.”
He added: “We’ve had great support from brokers. But the reality we have found is that the insurance company itself doesn’t have a complete and definitive list of policyholders.
“We have to go to brokers to find that information. Sometimes to the organisations that finance premium payments. That can be a labourious process, which delays our abilities to protect policyholders.”
He said the guarantee scheme was working with the FCA and the Bank of England on enforcement of existing rules.
He said: “I’m not sure it is necessarily the case of more rules. I think there are already regulatory requirements in place regarding data. It’s more the case of ensuring that those rules are being adhered to.”
The FSCS announced in August it had arranged alternative cover with a Lloyd’s syndicate for 177,000 guaranteed asset protection policies previously with Alpha.
In addition, in October it had arranged for Markerstudy to pick up another 10,700 Alpha policies.
Neale said the work on Alpha was “ongoing” and said there was added complexity as a result of the overlap in jurisdiction with the Danish Guarantee Fund.
“We have a very good relationship with our Danish counterparts,” he added. “But we had to disentangle what protection the Danish scheme provided and compare it to what we provide, to work out where people were covered by the Danish scheme and where they would be covered by us. Inevitably, that added a layer of complexity.”
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