There are no laws in the UK that require a person to have life
insurance. It's an entirely voluntary insurance. About 40% of
the UK's working population are covered by life insurance either
through their own policy or via an arrangement through their
employer.
So the simple things first. You have to be a UK resident in
order to buy a life insurance policy from a UK based insurance
company. This is not a requirement laid down in UK law, but UK
laws and tax arrangements make it impossible for a UK based
insurance company to offer insurance to anyone other than a UK
resident. But be aware that if, having taken out life insurance,
you later live abroad, your policy will be invalidated.
Naturally, invalidation does not apply if you are on holiday but
if you have a short-term work assignment abroad you are well
advised to inform your insurance company before you go.
All UK Insurance Companies are subject to UK Corporate Laws.
However, there are special regulations that only apply to
insurance companies. These control the value of the risks the
companies take on in relation to their financial reserves. These
regulations are designed to ensure that your insurance company
will be in a position to pay if you claim.
The Data Protection Act 1998 is concerned with way all UK
businesses store, safeguard and use the data they collect about
people. This is particularly important within the life insurance
industry as the companies store significant amounts of very
personal information about you - including your age, health
record and life style. One of the key provisions of the Data
Protection Act says that if a business wishes to pass on your
information for marketing purposes, the business collecting the
data must tell you of its intention and give you the opportunity
of refusing permission for your data be used in that way.
Incidentally, all reputable web sites selling life insurance
will have a "Privacy Statement" which tells you how they handle
your information and how it is used.
The Financial Services and Markets Act (2000) is the most
important piece of legislation affecting the promotion of
financial services in the UK including life insurance. The Act
is highly complex but is primarily concerned with protecting you
the customer. The implementations of the Act is overseen by the
Financial Services Authority (FSA). The FSA regulates all forms
of the promotion of financial products and services including
the activities of financial and mortgage advisors in the UK.
Their aim is to ensure you receive clear professional advice
that reflects your personal circumstances. They also ensure you
have a route to compensation should it be proved that you
received inadequate or poor advice.
For the layman, the FSA's biggest impact is reflected in the
advisors they talk to. The FSA seeks to ensure that all
financial advisors are trustworthy and competent which includes
being well supervised and well trained, and that any advice is
given in your best interests. The FSA also ensures that you are
given full and accurate information about the products you are
being advised to buy both before and after you have bought them.
They also closely oversee the organisations that actually create
the financial products.
In fact everyone and every organisation giving financial advice
in the UK must be authorised by the Financial Services Authority.
However, the Act makes a distinction between financial products
bought as a result of a recommendation from a Financial Adviser
and "Execution Only" business. Execution Only is where a
customer is wholly responsible for the selection of the
investment and therefore the financial advisers' sole
responsibility is to process the purchase efficiently. Under
Execution Only, the Adviser bears no responsibility for the
products suitability for the clients needs.
You should be aware that many of the web sites promoting life
insurance operate on this Execution Only basis. However, most
web site operators provide extensive information to enable the
client to make an informed choice. Sometimes the information is
published on the web site and sometimes provided during a
follow-up telephone call. Either way, within their Terms of
Business the web site will have to tell you on what basis they
provide financial services and as part of your application, you
will normally be required to confirm that you have read those
Terms.
Those Terms of Business will always include details of a
complaints procedure. In outline, if a customer wishes to
complain, then the customer must detail the complaint in writing
and send it to the Compliance Officer for the business employing
the advisor. That business then has to investigate the complaint
and reply to the customer in writing. If the Compliance Officer
upholds the complaint, and the customer has suffered a financial
loss as a result, then the business must agree a financial
settlement with the customer. Ultimately, if the customer has
suffered financial loss and cannot accept either the
organisations' conclusions or their proposed financial
settlement, then the situation can be referred to the Financial
Ombudsman. The Financial Ombudsman's service is free to the
customer and they are wholly independent. The Financial
Ombudsman's decision is usually binding on both parties.
The other central piece of protection for the customer is the
Financial Services Compensation Scheme. This provides the
customer with a level of protection if a financial organisation
regulated by the FSA becomes insolvent and cannot properly meet
its financial responsibilities to its clients.
Postscript The above information represents the legal aspects we
think you will have found most useful. The information is
neither definitive nor exhaustive but is simply an introduction
for the layman.
If you would like more detailed information relating to the
regulation of life insurance companies, insurance brokers, or
financial advisers you should visit the Financial Services
Authority's web site at:
www.fsa.gov.uk
About the author:
Michael Challiner has 15 years experience in financial services
marketing at senior level. Michael now works as the editor of
http://www.life-assurance-bureau.co.uk Futher reading
http://www.life-assurance-bureau.co.uk/life-insurance/ Futher
reading
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