FOS claiming 'no connection' between company which sold PPI and insurers

edited 16 May at 10:42PM in Reclaim PPI & Other Insurance
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Fred_FunkFred_Funk Forumite
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edited 16 May at 10:42PM in Reclaim PPI & Other Insurance
The Financial Ombudsman Service [FOI] has finally come back to me with its thoughts on a long-standing complaint about mis-sold PPI.

The policy was sold to me in April 1997, which, as I appreciate, is before policies became regulated by the FCA on January 14, 2005.

The policy was sold to me by Cofidis which at the time of the sale was not covered by any of the schemes which were applicable before the FCA regulated the sale of PPI policies so the FOS has asserted that my complaint cannot be pursued there.

However, I was already aware of this and my complaint to the FOS was not against Cofidis but the company that provided the cover for the PPI policy, Chubb European Group SE / ACE Insurance S.A. [Chubb] which, at the time of the sale, was covered by one of the schemes that existed before 14.01.05.

The FOS acknowledges this but has said: "There does not appear to have been any direct connection between Cofidis and Chubb at the time of the sale. So the only way Chubb would be responsible is if we can establish that Cofidis was acting as an agent of Chubb when selling the PPI."”

It is the above with which I struggle to agree, but would appreciate the thoughts of those with more expertise than me in these matters.

Firstly, it seems to me there was a direct connection between Cofidis and Chubb. I have supplied the FOS with a copy of the original terms & conditions of the policy, which is titled 'Cofidis Limited Protection Plan' and refers throughout to Chubb. Moreover, it also states that should you wish to cancel the cover at any time you must do so not by writing directly to Chubb but to Cofidis.

This being the case, it seems clear to me that, contrary to the FOS's assertion, there was 'a direct connection between Cofidis and Chubb at the time of the sale' and, what is more, it is entirely conceivable that there was an agency relationship between the two.

The FOS goes on to make the point that it contacted Chubb which advised that it 'did not have an agency relationship with Cofidis'. Of course, they would say that wouldn't they!

More to the point, when I complained to Chubb, contrary to what they subsequently told the FOS, they said: "Unfortunately, due to the passage of time we no longer hold any information to confirm the relationship between Cofidis Insurance and Chubb when the policy was sold".’

In these circumstances, it is my belief that as a member of the Association of British Insurers, Chubb had an obligation to act in accordance with ABI guidelines and take measures to ensure that any third party, such as Cofidis, selling PPI policies on its behalf did so in accordance with the industry codes of good practice.

Any thoughts gratefully received.

Thanks in anticipation
Fred_Funk
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  • edited 16 May at 10:31PM
    zx81zx81 Forumite
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    edited 16 May at 10:31PM
    As it's pre regulation and your complaint can only be against the caller, not the insurer, your complaint is dead in the water, regardless of any other aspects of your post.
  • dunstonhdunstonh Forumite
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    The FOS acknowledges this but has said: "There does not appear to have been any direct connection between Cofidis and Chubb at the time of the sale. So the only way Chubb would be responsible is if we can establish that Cofidis was acting as an agent of Chubb when selling the PPI."”

    That is correct.  

    I am an IFA.  I can place investments, pension, insurance etc with any company in the marketplace.  However, none of those companies are liable for the sale.  Only my company is.   The seller carries liability unless the seller is an agent of the insurer. There is a small window of cases where an insurer can carry liability if there was a commercial relationship between the seller and insurer and the insurer was a member of the ABI at the time.

    Firstly, it seems to me there was a direct connection between Cofidis and Chubb. I have supplied the FOS with a copy of the original terms & conditions of the policy, which is titled 'Cofidis Limited Protection Plan' and refers throughout to Chubb. Moreover, it also states that should you wish to cancel the cover at any time you must do so not by writing directly to Chubb but to Cofidis.

    That is normal wording for insurance sold through intermediaries.  you cancel with the insurer, not the intermediary.

    This being the case, it seems clear to me that, contrary to the FOS's assertion, there was 'a direct connection between Cofidis and Chubb at the time of the sale' and, what is more, it is entirely conceivable that there was an agency relationship between the two.

    Agency relationship does not pass liability to the insurer (noting again, that we have agencies with most insurers).  

    In these circumstances, it is my belief that as a member of the Association of British Insurers, Chubb had an obligation to act in accordance with ABI guidelines and take measures to ensure that any third party, such as Cofidis, selling PPI policies on its behalf did so in accordance with the industry codes of good practice.

    Only if there was a commercial arrangement between the two.  If Cofids were just putting everything through Chubb by choice as an intermediary and no commercial relationship existed between them then it doesn't apply.

    Your problem is going to be proving their business relationship was not an agency/intermediary relationship but a commercial link up.


    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • edited 16 May at 10:58PM
    Fred_FunkFred_Funk Forumite
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    edited 16 May at 10:58PM
    Thanks for your response, it's much appreciated.

    However, you said: 
    That is normal wording for insurance sold through intermediaries. You cancel with the insurer, not the intermediary.
    My point was that this ISN'T the case with my policy, which says I must cancel by writing to Cofidis. This suggests to me that there may have been a commercial link-up between the two, though I would welcome your thoughts.

    Furthermore, my response from the FOS appears to contradict your assertion that: 'Agency relationship does not pass liability to the insurer.' In my response from the FOS, it says:
    Chubb was covered by our jurisdiction at the time of sale. However, this does not mean we can investigate every type of complaint against it. In this case there does not appear to have been any direct connection between Cofidis and Chubb at the time of the sale. So, the only way Chubb would be responsible is if we can establish that Cofidis were acting as an agent of Chubb when selling the PPI.
    Again, I'd welcome any further thoughts you might have.

    Thanks in anticipation
    Fred_Funk
  • edited 16 May at 11:06PM
    Fred_FunkFred_Funk Forumite
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    edited 16 May at 11:06PM
    As it's pre regulation and your complaint can only be against the caller, not the insurer, your complaint is dead in the water, regardless of any other aspects of your post.
    Appreciate your response, but reasonably sure it's a little bit more nuanced than this. Certainly, my response from the FOs suggests as much:
    Generally speaking, we can only deal with complaints about PPI policies sold on or after 14 January 2005. That is the date when the sale of these policies became regulated by the FCA. We can only look at complaints about policies sold before 14 January 2005 if:
    • The policy was sold in conjunction with another activity for which the selling business was covered by us; or,
    • The complaint could have been considered by one of the previous dispute resolution schemes that we took over from.
    My complaint would have been considered by one of the previous schemes, namely the ABI code of conduct.
  • dunstonhdunstonh Forumite
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    My point was that this ISN'T the case with my policy, which says I must cancel by writing to Cofidis. This suggests to me that there may have been a commercial link-up between the two, though I would welcome your thoughts.

    Not necessarily.    Some intermediaries like to keep control.  Often so they can try and talk you out of it.       Despite intermediaries often saying deal with the insurer direct, they can deal with these things themselves if they wish.

    Furthermore, my response from the FOS appears to contradict your assertion that: 'Agency relationship does not pass liability to the insurer.' In my response from the FOS, it says:

    Agency and acting as agent are two different things.     Acting as agent of the insurer would see the insurer responsible.  Having an "agency relationship" as you called it in post#1 is normal for independent intermediaries.  e.g. I have agencies with most insurers but I am not an agent of the insurer.   The insurer is not liable for sales made by an independent or unlinked intermediary with an agency relationship.  It is liable if the seller is an agent of the insurer.

    Sometimes the terminology gets merged and mixed up.  For example, my agencies have an agent code despite not being an agent.   And an intermediary can also be an agent of the insurer. The key bit is whether the seller was an agent of the insurer.

    My complaint would have been considered by one of the previous schemes, namely the ABI code of conduct.

    Typically, the ABI would see the insurer liable, even though its pre-regulation, if the seller was an agent of the insurer but not an independent intermediary.  That also assumes the insurer was a member of the ABI at the time. Many were not at that time.  Just as many did not join the GISC (which wouldn't apply in this case due to dates)

    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • edited 18 May at 2:06AM
    Fred_FunkFred_Funk Forumite
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    edited 18 May at 2:06AM
    Thanks, again, for responding – it's very much appreciated. Still struggling a bit to get my head around the difference between being an agent of the insurer and an agency relationship but I think I get the gist.

    In any case, your following line interested me:
    The insurer is not liable for sales made by an independent or unlinked intermediary with an agency relationship.  It is liable if the seller is an agent of the insurer.
    As I have said, it seems clear to me that there was a link between the insurer [Chubb] and the intermediary [Cofidis]. The latter did not offer me a choice of PPI policies, rather the Cofidis Limited Protection Plan was the only option on the table [when I applied for my Cofidis Direct Cash reserve, there was a tick box for anyone wanting to take advantage of this 'special' protection plan, which was named on the application form].

    In these circumstances, ie where the Cofidis application form encourages the applicant to take out the PPI provided by Chubb [for which no doubt it would have received a hefty commission] I am struggling to see how the intermediary could possibly be regarded as independent or unlinked.

    You made the point that you can place business with any company in the marketplace, ie an agency relationship. However, this was not the case with Cofidis who placed their PPI business exclusively with Chubb. I'd have thought this makes the former an agent of the latter, though, as ever, would welcome your thoughts.

    What is more, given Chubb was a member of the ABI at this time, it must surely have had an obligation to ensure that Cofidis was selling its PPI policies in line with the ABI code[?]. I'm not suggesting that Chubb was obliged to oversee every sale, but surely it must at least have had an obligation to ensure that Cofidis was making clear the essential provisions of the cover and taking some minimal measures to ascertain whether it was suitable? Had it sought to look at the Cofidis application form it would quickly have become apparent this was not the case.

    Once again, I shall look forward to your response. Thank you.
  • HappyHarryHappyHarry Forumite
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    The bottom line is that you are complaining about being mis-sold a product. You are not complaining about the product itself.

    Chubb provides the product, however, they did not sell you the product, and so complaining to them about a mis-selling is not going to get you anywhere.

    Cofidis sold you the product, therefore you can only complain  to them about mis-selling it to you.

    If you bought a washing machine from the independent store  "washing machines 'R' us", and the salesperson there promised that it would wash, dry, iron and fold your clothes, you would be rightly disappointed to find the washing machine just left your clothes in a wet heap in the bottom of the washing machine. However, complaining to the washing machine manufacturer will not get you anywhere, as their washing machine is only designed to wash clothes. Your complaint would go to "washing machines 'R' us" who mis-sold you the washing machine. 

    "washing machines 'R' us" would have an agreement with the manufacturer that they could sell their washing machines. This is an agency agreement. However, that does not make the manufacturer responsible for the sale. This is even if "washing machines 'R' us" sells only the manufacturers washing machines.

    If "washing machines 'R' us" was a sales arm of the manufacturer, then they would be an agent of the manufacturer, and you could pursue the manufacturer for their mis-selling in the sales process.




    I am an Independent Financial Adviser. Any comments I make here are intended for information / discussion only. Nothing I post here should be construed as advice. If you are looking for individual financial advice, please contact a local Independent Financial Adviser.
  • dunstonhdunstonh Forumite
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    As I have said, it seems clear to me that there was a link between the insurer [Chubb] and the intermediary [Cofidis]. The latter did not offer me a choice of PPI policies, rather the Cofidis Limited Protection Plan was the only option on the table [when I applied for my Cofidis Direct Cash reserve, there was a tick box for anyone wanting to take advantage of this 'special' protection plan, which was named on the application form].

    It's not clear but it is a possibility.    If Cofids decided to look at the marketplace and choose Chubb as their only option then Chubb is not responsible.   If Cofids went to Chubb and became an appointed representative of Chubb or Chubb took on the commercial responsibility for the agents selling the policies then Chubb would be responsible.

    Just because Chubb was the only option and forms printed on that basis does not necessarily mean that there was a commercial link between the two companies.   Just a possibility there was.  Cofids may have just selected one provider as they didn't want to go through multiple providers on their forms and have that extra work of their staff having to cover off multiple providers.

    You made the point that you can place business with any company in the marketplace, ie an agency relationship. However, this was not the case with Cofidis who placed their PPI business exclusively with Chubb. I'd have thought this makes the former an agent of the latter, though, as ever, would welcome your thoughts.

    Firms can choose how they restrict their offering.    That can mean entering into a commercial relationship to get a bespoke plan specific to them and often a profit share as well.  Or it can no commercial relationship but using the off-the-shelf version

    What is more, given Chubb was a member of the ABI at this time, it must surely have had an obligation to ensure that Cofidis was selling its PPI policies in line with the ABI code[?]

    No.  The insurer is not responsible unless the seller was an agent of the insurer or there was a commercial link.   Still the case today where the selling firm carries the liability - not the provider unless the selling firm is an agent of the provider.

    The problem you have is that they could have been linked or they could have been using the off-the-shelf options with no linking.  So, you are reliant on Chubb or Cofidis stating which it is or the sale being late enough on in the day where evidence is available that can show that.

    For reference, back in the early 90S, I worked for a bank controlling their insurance agencies.  That was when the banks retailed off-the-shelf solutions from the marketplace and not bespoke options tied in with commercial relationships.  They came in about 93 onwards.  The off-the-shelf solutions would see you send the insurer a form and a cheque and that is all the insurer got.   In bulk insurances, it was just name, address, DOB and amounts and a cheque for the total.   When the commercial relationships started, it was a bespoke product built specifically for them. There was profit-sharing included and dedicated processing teams and centralised payments.   Typically, it was the larger lenders that had these types of integration where the insurer would carry liabilty.  The smaller lenders would use the off-the-shelf solution.

    The ability to use the ABI code is a bit of luck for some PPI complaints. Nobody back then understood the insurers were liable.  That only came into play during the PPI complaints period.   

    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • edited 19 May at 3:36AM
    Fred_FunkFred_Funk Forumite
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    edited 19 May at 3:36AM
    Sincere thanks for taking the time to share your thoughts.
    The problem you have is that they could have been linked or they could have been using the off-the-shelf options with no linking.  So, you are reliant on Chubb or Cofidis stating which it is or the sale being late enough on in the day where evidence is available that can show that.
    As regards the above, if I give you a little more detail it may be clearer why I think a strong case can be made that there was a commercial link between Chubb and Cofidis.

    Firstly, as I have already outlined, the Cofidis application form didn't ask if I wanted to take out any old PPI, rather it made explicit reference to 'the special Cofidis Payment Protection Plan', aka the policy offered by Chubb. Furthermore, the actual policy document, which has been produced by Chubb, is not a generic off-the-shelf one but one which refers throughout to Cofidis and the specific arrangements in place between the two organisations. 

    Further to what you have said, I appreciate that this alone might not be enough to demonstrate there was a commercial link between the two orgnisations. However, I have a further piece of evidence which, it seems to me, makes my case more compelling.

    The Cofidis product I was applying for wasn't your bog-standard loan, or a credit card, but what I believe is known as a 'running account credit agreement'. This being the case, it wasn't a simple matter of Cofidis sending the insurer a form and a cheque at the outset to cover the cost of the insurance, but rather my insurance premium would be calculated each month on the basis of the balance outstanding – that's to say Cofidis would have passed part of my payment to them on to Chubb every month for in excess of five years.

    As an aside, I stumbled upon this 2007 paper by the Law Commission / Scottish Law Commission [https://s3-eu-west-2.amazonaws.com/lawcom-prod-storage-11jsxou24uy7q/uploads/2015/06/ICL3_Intermediaries_and_Pre-contract_Information.pdf] which takes an in-depth look at whether an intermediary, in this case Cofidis, is acting as an agent of the insurer or the insured and suggests it's often the former.

    For instance, I was particularly interested in 6.28 which says:
    Our tentative view is that the intermediary should be regarded as the insurer’s agent for the purposes of obtaining pre-contract information, unless the intermediary is genuinely searching the market on the insured’s behalf.
    Once again, I shall look forward to your thoughts.

    Thanks in anticipation
    Fred_Funk
  • dunstonhdunstonh Forumite
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    Firstly, as I have already outlined, the Cofidis application form didn't ask if I wanted to take out any old PPI, rather it made explicit reference to 'the special Cofidis Payment Protection Plan', aka the policy offered by Chubb. Furthermore, the actual policy document, which has been produced by Chubb, is not a generic off-the-shelf one but one which refers throughout to Cofidis and the specific arrangements in place between the two organisations.
    Have you given a copy of that to the FOS?
    It may not make a difference as the broker name often appears in the documentation on many products.   When the documentation is created, they will have configurable fields allowing input of the broker name and their chosen product name.   
    The Cofidis product I was applying for wasn't your bog-standard loan, or a credit card, but what I believe is known as a 'running account credit agreement'. This being the case, it wasn't a simple matter of Cofidis sending the insurer a form and a cheque at the outset to cover the cost of the insurance, but rather my insurance premium would be calculated each month on the basis of the balance outstanding – that's to say Cofidis would have passed part of my payment to them on to Chubb every month for in excess of five years.
    That still doesn't indicate a tied business relationship.  Again, it could do but equally, it could be that Chubb had a product for this scenario.  Even if Chubb built a product that was unique to the broker, does not mean that Chubb carry the liability.   The commercial sector does see a lot of policies built to fit a business.    They have template plans that they bolt on bits or take things off to suit what the business needs.
    As an aside, I stumbled upon this 2007 paper by the Law Commission / Scottish Law Commission [https://s3-eu-west-2.amazonaws.com/lawcom-prod-storage-11jsxou24uy7q/uploads/2015/06/ICL3_Intermediaries_and_Pre-contract_Information.pdf] which takes an in-depth look at whether an intermediary, in this case Cofidis, is acting as an agent of the insurer or the insured and suggests it's often the former.
    Forget about post regulation changes.  The rules and law have changed many times over the years.  The rules at date of sale are what matters.
    But even this would not indicate the insurer was liable as Cofidis could have gone to 5 different insurers, told them what they wanted and Chubb was the one they chose from that.

    I'm not being negative to your comments but just highlighting why assumptions based on snippets of information cannot be relied upon.

    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
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