Self-regulation or strangulation?

The time has come for the genetically engineered salesforce. Conformity is the new watchword. Individuality is dangerous, unpredictable, uncontrollable and may spoil the game for the rest of us. So it must go.

The life insurance and pensions industry is caught in a bind. On one hand it pays by results, through commission, accounting for up to 100 per cent of income. On the other, it faces tough regulation by authorities that the industry itself caused to be set up in the 1987 Financial Services Act, flushed with the notion of self-regulation.

Many leaders of the sector now admit that if the nightmare proportions of today's self-regulatory machinery had been foreseen, the law might have followed a very different course.

Recently, thousands of sales staff in the sector have been returned to barracks for further compulsory training. 'Training will cost us sales this year,' one chief executive says.

The suggestion that many low-income pension policy-holders have been given inappropriate advice in contracting out of employer schemes has caused more angst. Some life and pensions offices are making large provisions for compensation. And many have already been fined for transgressions by their sales people.

Many readers will welcome this discomfort, if it means that their pensions are more likely to be secure and appropriate to their needs. They may well support the Office of Fair Trading's view that levels of commission on life and pensions products are 'fundamentally unhealthy'. How, you may ask, can sales people provide truly objective advice when their very livelihood depends on making a sale - almost any sale?

During the darker days of the recession, many on commission earned insufficient income to meet their mortgage payments, let alone achieve any recognisable quality of life. In the headier days of the 1980s, many of the same people had had money to burn and self-image to indulge.

Against this roller-coaster of personal fortunes, they now face the noose of self-regulation. A sale may be made only on its objective merits and after due process. Commission, too, must be disclosed at the point of sale.

Not everyone, however, sees this regulation in a wholly negative light. Protecting the public from itself, while seemingly denying a cardinal tenet of market forces, makes sense to some.

The fine print of many a policy document would challenge members of Mensa, let alone mere mortals. Even though the UK is under-insured and adequate state pension provision may scarcely outlive the millennium, the decisions implicit in taking out these policies have far-reaching effects.

It makes sense for the industry to promote, and practise, financial rectitude. The core element is trust. Policies are sold in anticipation of performance. The assumptions made are, understandably, presented in a positive light. History has generally confirmed that performance has matched, even exceeded, the basis of assumption. Nevertheless, the regulatory authorities demand that these assumptions represent a spread of risk.

This is scarcely objectionable. First, it warns the prospective policy-holder that performance goes down as well as up. Second, it puts the brake on any untoward optimism in sales material. Third, it creates something of a level playing-field. Customers need to be able to make intelligent choices, comparing the achieved performance of the individual insurers, not their vaunted claims.

However, there remains the key question of how far salesforces can be left to their own devices. As several thousand of them have been suspended from active duty pending further training, it might seem that the case for regulation of their sales behaviour is proven.

Whether the regulatory system should be self-managed or statutory is the latest battleground.

The debate on this point will run and run, but what is undeniable is that the need for regulation is a direct product of the way the sector rewards and trains its sales people. Commission will have to go, or be relegated to a modest top-up reward. To do anything else is to ensure closer regulation.

Many training systems make use of distance-learning materials. But distance-learning requires self-motivation. Anyone who has tried to learn a language this way knows that the pain barrier is reached after only a few 'lessons'. Given the tiny earnings of many trainees, motivation for learning is, unsurprisingly, elusive.

The problems of training, commission and regulation - let alone the impending crisis in state provision of pensions - demands reassessment. Otherwise, the sector will remain in strategic crisis - a situation incompatible with the UK's aim to stay at the forefront of global financial systems.

The author is marketing director at Sundridge Park Management Centre.

Start your day with The Independent, sign up for daily news emails
Voices
Barn owls are among species that could be affected
charity appeal
News
Sarah Silverman (middle) with sister Reform Rabbi Susan Silverman (right) and sister actress Laura Silverman (left) at Jerusalem's Western Wall for feminist Hanuka candle-lighting ceremony
peopleControversial comedian stages pro-equality Hanukkah lighting during a protest at Jerusalem's Wailing Wall
Arts and Entertainment
The Bach Choir has been crowned the inaugural winner of Sky Arts’ show The Great Culture Quiz
arts + ents140-year-old choir declared winner of Sky Arts' 'The Great Culture Quiz'
Sport
After another poor series in Sri Lanka, Alastair Cook claimed all players go through a lean period
cricketEoin Morgan reportedly to take over ODI captaincy
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Carlton Senior Appointments: Private Banking Manager - Intl Bank - Los Angeles

$200 - $350 per annum: Carlton Senior Appointments: Managing Producer – Office...

Carlton Senior Appointments: San Fran - Investment Advisor – Ind Advisory Firm

$125 - $225 per annum: Carlton Senior Appointments: San Fran - Investment Advi...

Sheridan Maine: Commercial Finance Manager

Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Sheridan Maine: Regulatory Reporting Accountant

Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Day In a Page

Homeless Veterans appeal: 'You look for someone who's an inspiration and try to be like them'

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Could cannabis oil reverse the effects of cancer?

Could cannabis oil reverse effects of cancer?

As a film following six patients receiving the controversial treatment is released, Kate Hilpern uncovers a very slippery issue
The Interview movie review: You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here

The Interview movie review

You can't see Seth Rogen and James Franco's Kim Jong Un assassination film, but you can read about it here
Serial mania has propelled podcasts into the cultural mainstream

How podcasts became mainstream

People have consumed gripping armchair investigation Serial with a relish typically reserved for box-set binges
Jesus Christ has become an unlikely pin-up for hipster marketing companies

Jesus Christ has become an unlikely pin-up

Kevin Lee Light, aka "Jesus", is the newest client of creative agency Mother while rival agency Anomaly has launched Sexy Jesus, depicting the Messiah in a series of Athena-style poses
Rosetta space mission voted most important scientific breakthrough of 2014

A memorable year for science – if not for mice

The most important scientific breakthroughs of 2014
Christmas cocktails to make you merry: From eggnog to Brown Betty and Rum Bumpo

Christmas cocktails to make you merry

Mulled wine is an essential seasonal treat. But now drinkers are rediscovering other traditional festive tipples. Angela Clutton raises a glass to Christmas cocktails
5 best activity trackers

Fitness technology: 5 best activity trackers

Up the ante in your regimen and change the habits of a lifetime with this wearable tech
Paul Scholes column: It's a little-known fact, but I have played one of the seven dwarves

Paul Scholes column

It's a little-known fact, but I have played one of the seven dwarves
Fifa's travelling circus once again steals limelight from real stars

Fifa's travelling circus once again steals limelight from real stars

Club World Cup kicked into the long grass by the continued farce surrounding Blatter, Garcia, Russia and Qatar
Frank Warren column: 2014 – boxing is back and winning new fans

Frank Warren: Boxing is back and winning new fans

2014 proves it's now one of sport's biggest hitters again
Jeb Bush vs Hillary Clinton: The power dynamics of the two first families

Jeb Bush vs Hillary Clinton

Karen Tumulty explores the power dynamics of the two first families
Stockholm is rivalling Silicon Valley with a hotbed of technology start-ups

Stockholm is rivalling Silicon Valley

The Swedish capital is home to two of the most popular video games in the world, as well as thousands of technology start-ups worth hundreds of millions of pounds – and it's all happened since 2009
Did Japanese workers really get their symbols mixed up and display Santa on a crucifix?

Crucified Santa: Urban myth refuses to die

The story goes that Japanese store workers created a life-size effigy of a smiling "Father Kurisumasu" attached to a facsimile of Our Lord's final instrument of torture
Jennifer Saunders and Kate Moss join David Walliams on set for TV adaptation of The Boy in the Dress

The Boy in the Dress: On set with the stars

Walliams' story about a boy who goes to school in a dress will be shown this Christmas