The British Insurance Brokers' Association (Biba) has withdrawn its private medical insurance (PMI) scheme for members to remove a clause that handed all currently held business to its partner Jelf.
It was forced into the move after members discovered the terms of the introducer contract offered by Jelf included a clause which would pass all existing PMI business to the brokerage group.
The Biba scheme was launched earlier this month to provide an inlet for brokers with little experience of the sector to cater for their client's PMI needs.
However, clause three in the contract for intermediaries to join the Jelf supported scheme stated: "The introducer will transfer all their existing individual PMI business (excludes international policies) to Jelf. Jelf will deal directly with the Introducer's Customer and place the business through Jelf agencies and will therefore be responsible for the sales process and giving of advice."
This left experienced brokers furious with the Association and resulted in the contract being pulled while it was amended.
Susie Colley, managing director of West Country Health Care and a member of the Biba healthcare focus group, was concerned the scheme could lead to bad client outcomes and significant damage to smaller brokers.
"I'm not happy about this on so many levels it doesn't bear thinking about," she said.
"For example, a small broker who does only four or five PMI policies a year might think this is a good idea. But at renewal all his or her clients will presumably have a policy with Axa which may include exclusions that were previously covered.
"The long-term ramifications of this are just eye-watering and its not acceptable that Biba have done this," she added.
The Association admitted that the clause had been incorrectly included but was now in the process of being removed due to the feedback received.
Steve Foulsham, technical services manager at Biba, played a key role in producing the scheme and acknowledged this was not intended to be part of Biba's plans.
"We fully understand that members would not want to go down that route because they're independent brokers in their own right, so we wouldn't be happy with the situation ourselves," he said.
"Unfortunately it was an error that got through our compliance. It's been addressed and the new agreement will follow shortly.
"Following discussions between Axa and Jelf they have agreed a new form of words which can be used as an introducer agreement and that's what we're waiting for at this point in time," he added.
Foulsham also noted that although he did not believe anyone had signed up to the scheme yet, but if members had done so this would be disregarded and a new agreement required.
Wayne Pontin, sales director at Jelf Group, explained the clause had originally been inserted as a protection for the policy providers (Axa PPP) to avoid any deliberate anti-selection by brokers on the plan.
"We didn't want any form of selection against our underwriters," he said.
"But we knew there was some form of unrest, so were quite happy, because it's designed to provide access to the majority of Biba members, to remove the clause.
"Prior to this going live I presented all the terms of the scheme, including the transfer terms, to the whole of the Biba healthcare focus group nine to 12 months ago," he added.
The new version is expected to be available on the Biba website shortly.
