Insurance regulation puts off dealers

Vehicle dealers are giving up on insurance sales due to government over-regulation, according to a new survey from the RMI National Franchised Dealers Association (NFDA), a part of the Retail Motor Industry Federation (RMIF).

Since 2005 insurance sales have been regulated by the Financial Services Agency (FSA). Those that sell or advise on insurance products such as credit protection insurance, warranties, GAP products, and general motor insurance must be accredited by the FSA. The NFDA carried out its survey to gauge the impact the regulations on dealers.

The survey found that since 2005 number of dealers with full FSA authorisation has dropped from 76 per cent to 54 per cent now. Meanwhile, the percentage acting as insurance introducers – the least regulated option – has increased from 4 per cent in 2005 to 17 per cent today.

The new survey is a follow up to one performed in 2005.

Louise Wallis, the NFDA’s head of business development, commented: ‘Many in the motor trade believe that they should never have been included in the regulations in the first place.

‘The complexity and cost involved in being authorised is clearly putting many dealers off, as regulation of insurance sales has created a huge amount of extra paperwork. The volume and complexity of the paperwork is wildly disproportionate to the relative importance of insurance sales for their overall businesses. A number of dealers who originally opted for full FSA Regulation have now looked for alternatives for providing insurance to their customers.

Wallis added: ’The NFDA is working with the FSA to try and simplify some of the more complex and time-consuming elements.’