The FSA says it is "concerned" with the efforts of some insurance firms to learn and understand the importance of client money handling.
The regulator even says that, despite providing tools to help intermediaries grasp the concept, some companies are only prepared to use them if they know the FSA is preparing a visit.
In addition, firms have been told they need to start taking steps to meet the FSA’s capital resources requirement, the deadline for which is January next year.
Andrew Honey, FSA head of insurance, small firms division, was speaking at the British Insurance Brokers’ Association (BIBA) annual conference.
He says the FSA is pleased to find a “willingness” from firms to comply with the FSA’s principles on client money handling, but suggests some firms are not taking them seriously.
He points out between September and December 2006 the regulator carried out the third phase of its client money work, visiting 161 general insurance intermediaries.
He says results showed most intermediaries who had used the FSA’s new tools provided for them, including a Guide to Client Money and a web-based training course, had a better understanding of client money handling.
However, he says other firms were less willing to comply.
“Despite improvements, we are still concerned about the overall level of compliance in this area as some firms only used the help available once they were aware of our forthcoming visit or did not use it at all,” he says.
“We will take a dim view of any firm which has had every chance to put things right and has failed to do so.”
Honey also told the conference the FSA is working with BIBA on its goodwill initiative, which will be used when calculating a firm’s capital resources.
He highlighted the importance of the requirement, pointing out the probability of consumers facing loss must be kept as low as possible.
However, he says while some firms are doing well in ensuring their capital position is strong, others are struggling.
He says: “We will not approve arrangements based on some of the “paper exercises” which have been circulated which propose making cosmetic changes without ensuring that the underlying position is strong.”
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