Lloyds of London has launched a root-and-branch reform programme designed to combat a lack of financial control within the insurance market and reprimand those who do not comply.
Announced last week in its Regulatory Plan for 1999, the move includes a number of measures that will challenge brokers and their auditors, who have been accused of disregarding good practice to improve the state of their balance sheet.
Director of regulation David Gittings said: ‘We are sending a message to the accountants of Lloyds’ brokers that they need to be aware of the issues while we insist that brokers get their houses in order.’
The Lloyds’ regulatory board has sought counsel’s advice to ensure the proposed changes to the system are workable.
Among the market’s priorities are recommendations to prevent brokers ignoring certain debts and stopping the practice of brokers bringing forward income recognition before the cash is received.
‘In the most extreme examples, substantial proportions of the following year’s income are anticipated before orders are received from clients,’ according to the report. ‘A consistent approach to this issue will be introduced in 1999.’
The regulatory board of Lloyds – itself an insurance market, where individual underwriters accept risks on behalf of some 159 syndicates of individual and corporate members – has also identified 12 brokers that have guaranteed motor premiums that are greater than their net assets.
The board plans to issue more comprehensive reporting requirements to put a stop to this shortly.
One source within the market said that it was ‘disgraceful’ that an institution of Lloyds’ standing had allowed these practices to continue.
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