Article date: 14 January 2004
Norwich Union is strongly urging motor traders to act now orface being forced to withdraw from selling financial serviceproducts.
New legislation effective from 14 January 2005 will make itillegal for any business to sell general insurance products withoutbeing authorised by the Financial Services Authority (FSA).
Barry Hogg, motor trade manager at Norwich Union, explains:"This legislation is set to hit the motor trade sector hard, as asignificant proportion of its business profits come directly fromselling financial services products such as creditor/paymentprotection, gap insurance, warranties, motor insurance including‘free’ deals and breakdown cover.
"Motor traders, particularly within the franchised sector, willhave no option other than to seek authorisation and comply with thenew terms. Opting out of selling financial services is likely tojeopardise the future of many such businesses.
"The cost of compliance for a typical franchised dealership islikely to reach between £20k - £30k depending on the size of thebusiness and the number of sites. For larger operators, the costscould run into hundreds of thousands, possibly millions, of poundsper annum.
"The new legislation will add significantly to the cost oftraining staff and will make staff retention in this notoriouslytransient sector more important than ever. Dealerships will beforced to invest in training all employees involved in providingfinancial services, whether through direct selling or in anadvisory capacity."
FSA authorisation and ongoing compliance will place asignificant cost burden upon the retail motor trade sector as awhole. Estimates suggest this could reach £300M per annum once allthe cost elements are taken into account, including the applicationfee, establishing a training and competency framework, anauthorised person registration fee, taking out professionalindemnity insurance and becoming a member of the FinancialOmbudsman Service.
Application packs are available now from www.fsa.gov.uk/mgiand applications must be submitted to the FSA by 13 July 2004 forguaranteed processing by 14 January 2005.
Motor traders should contact their usual insurance advisor– who will also be required to comply with this regulation– for further advice and guidance.
For further information, please contact:
Alison Owen at Staniforth on 0161 274 0100 or David Ross at NorwichUnion on 08703 66 68 65/07786 526350.
Notes to editors
- Norwich Union is the UK's largest insurer with a market shareof around 14 per cent
- With a focus on insurance for individuals and smallbusinesses, Norwich Union insures:
- - one in five households
- - one in seven motor vehicles
- more than 800,000 businesses
- Norwich Union products are available through a variety ofdistribution channels including brokers, corporate partners suchas banks and building societies and Norwich Union Direct.
- Norwich Union’s news releases and a selection of imagesare available on the Aviva internet press centre atwww.aviva.com/media.
- An ISDN facility is available for studio quality broadcast.Call the press office on 08703 66 68 68
For all life & pensions media enquiries 08703 66 68 73
For all other media enquiries 08703 66 68 68