The Financial Services Authority (FSA) is to carry out a review the effectiveness of its general insurance regulatory regime.
Speaking at the Chartered Insurance (CII) annual conference yesterday, Clive Briault, FSA managing director of retail markets, says: “If the review leads us to conclude that changes to our rules and guidance are necessary, we will, of course, consult on these in the usual way”.
The review will begin in April 2006 and focus on retail conduct of business requirements and how well the regime is meeting the intended outcomes for consumers set out in the consultation process in January 2005, says the FSA.
Briault says the review will be built on three core features: encouraging feedback from firms and other stakeholders on what they think is effective or ineffective in the regime; undertaking consumer research to see whether the intended benefits of the regime and materialising; and continuing the FSA’s thematic and firm-specific work to check the industry is complying with the regime.
“The review will be undertaken alongside the review of the effectiveness of the mortgage regime, which we have already announced and which will begin at the end of this year,” Briault states.
“This joined up approach will recognise the linkages between the mortgage and general insurance regimes, and the fact that many firms are active in both these markets.”
The FSA aims to feed back the initial findings towards the end of 2006.
Briault also discussed the FSA’s work in establishing the risks posed by the sale of payment protection insurance (PPI) linked to other financial products.
The FSA has completed a series of visits to firms to look at PPI selling practices which Briault described as “variable”.
He syas: “Some firms demonstrated good compliance with our rules – they were addressing problems that may have existed in the past, such as checking that customers are eligible for the policy before selling it. However, selling practices in other sectors were very poor."
Briault says the FSA is: “determined to improve standards in this market and intend to publish in November examples of good and bad practice so that firms know what we expect from them”.
And he claims there are three choices to achieving a market solution to the issues: introducing tougher requirements; action by the competition authorities; or improvement by the industry of its own standards, which he describes as “the simplest, quickest and most effective way forward”.
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