Many general insurers and brokers will not be compliant to operate under the new FSA regulations which come into force from January 15th, suggests a technology survey.
Research conducted by data servicing company docucorp reveals almost all – 96% - of 200 senior managers at insurance-related firms believe many firms will fail to implement compliant procedures by the time new FSA rules are enforceable on Saturday 15th January.
According to the study, 92% if those questioned believe the FSA has underestimated the actual cost of implementing the EU-wide Insurance Mediation Directive – requiring all insurance intermediaries be regulated – while it is also assumed many firms are trying to handle compliance without putting sufficient checks and procedures in place to meet FSA rules.
At least two-thirds (66%) of the managers also questioned whether the FSA will look to make examples of some insurance brokers or providers once the new regime begins.
Under the new regulated regime, insurance providers and distributors must be able to access all information the regulator requires within 48 hours, including sales and policy documents and claims data however, datacorp’s survey suggests 86% of respondents believe their existing record keeping systems would be unable to cope with this requirement.
Tracey Robinson, managing director of Docucorp, argues firms are feeling the pressure of trying to meet new regulations as – like most mortgage brokers who had to gain FSA authorisation to trade by October 31st last year – insurance intermediaries are unlikely to have held FSA authorisation before.
“The FSA does not appear to have taken into account the extent of the preparations that insurers and brokers are having to make,” says Robinson.
“The majority of firms applying for general insurance authorisation - 63% in our survey - are not already authorised by the FSA for any other type of business, such as life assurance or investment management, and are therefore entirely unaccustomed to such stringent regulation.
“Some of the rules, most notably the introduction of a regulated sales process and major, new record-keeping requirements, are also entirely new to the industry and require substantial changes to IT systems that some firms are clearly not going to be able complete in time,” she adds.IFAonline
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