Insurance regulation needs to be clear, consistent and aimed at everyone who deals with insurance ...
Insurance regulation needs to be clear, consistent and aimed at everyone who deals with insurance products, not just financial services firms, say the ABI and the GISC in response to the Treasury's consultation document, Regulating Insurance Mediation.
Both the ABI and the General Insurance Standards Council - the independent regulator of general insurers and intermediaries whose powers are soon to be transferred to the FSA - are keen to see the creation of a level playing field between insurers and intermediaries through regulation of the sales process.
The ABI warns against excluding regulation of some travel insurance sold by tour operators and travel agents as it would lead to confusion for consumers and higher compliance costs for regulated providers.
The ABI's director general, Mary Francis says "It would lead to higher compliance costs for regulated providers, so encouraging unregulated sales. This distortion could lead to reduced choice for consumers."
Although the EU Insurance Mediation Directive requires the regulation of mediation activities in relation to all insurance contracts, insurance sold as part of a package is exempt. So travel insurance sold as a stand-alone product will need to be regulated, but not if it is sold as part of a package deal.
The GISC is also calling for regulation across stand-alone and packaged travel insurance. The lack of transparency in packaged products makes it all the more reason why it should come under regulation says the GISC.
But the government's proposal to avoid market distortions by regulating all extended motor vehicle warranties - including those valued at less than €500 which are excluded under the Directive - has been welcomed by the ABI and the GISC.
The ABI sees this initiative as the first step towards regulation of the whole warranty market.
The ABI is hoping that eventually there will be consistent regulation of the sales of both insured and uninsured warranty products.
To complete the level playing field the GISC is keen to see that all players come under regulation. The independent regulator is calling for the inclusion of ABTA and a number of Designated Professional Bodies, such as accountants and lawyers, to also come under regulation.
The GISC is also keen to see that claims handling by intermediaries on behalf of insurers come under regulation. The GISC says that the claims stage is when the product actually delivers which makes it essential that it is included under regulation.
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