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Important and far-reaching changes are being introduced into life insurance broking as a result of public pressure and the desire of the large and reputable insurance broking firms to introduce better standards and safeguards into the business. The four brokers' associations (the Corporation of Insur­ance Brokers, the Association of Insurance Brokers, the Lloyd's Insurance Brokers Association and the Federation of Insurance Brokers) have formed one joint group, the British Insurance Brokers Association, which has taken the lead in a scheme of self-regulation for the insurance broking industry.

Under the Insurance Brokers (Registration) Act of 1977, the use of the term "insurance broker" will be restricted by law to those firms which have satisfied a Registration Council that they qualify for registration as life insurance brokers. To do this, firms will have to demonstrate that their partners and senior personnel have suitable qualifications and experience in life insurance broking. They will also be required to have a professional indemnity life insurance policy to cover them for any mistakes and omissions in their business resulting in loss to clients for which they may be sued, and they will have to make a contribution, related to their firm's size, to a central protection fund which will be available to recom­pense any individual clients of a member firm who suffer loss through the failure of that firm. The Registration Council is composed of members of the British Insurance Brokers Association and representatives nominated by the Secretary of State for Trade, including one to represent prospective policyholders and one to represent the legal profession.

At present (1978) we are in a transitional period during which life insurance firms may make the decision whether or not to apply for registration. At the end of that period, the restriction on the use of the term "insurance broker" will come into force and only registered firms will be allowed to use it. The eventual outcome of the new system will be the division of the insurance broking industry into two cate­gories, registered and unregistered, the former alone calling themselves life insurance brokers.

 

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