FSA chairman Sir Howard Davies has indicated that the FSA is prepared to tackle the professional indemnity (PI) crisis.
Speaking at the 2003 ABI Conference, Davies told delegates "there is a significant market problem in the area of professional indemnity insurance."
He said: "I am nonetheless willing to acknowledge that there is a regulatory dimension to the problem. The shadow of the pensions review remains over the market, and insurers are concerned about the possibility of further retrospective reviews, which may produce costly compensation bills for them."
Davies also criticised the polarisation rule, saying that it has "outlived its usefulness".
He said: "I note that no other country with a similar industry structure has implemented such a draconian constraint on competition.
"The outcome of polarisation was to condemn many customers, particularly the less well-off, to restricted choice, and surveys show that they were not typically aware just how restricted that choice was."
Davies also criticised the industry for failing to conduct business to high ethical and business standards.
He said: "Sections of the industry continue to pay too little regard to the basic principles of treating customers fairly. I would have thought that paying out over £11 billion in compensation would have focused the minds of firms more than it evidently has on the need to be sure that their selling practices are compliant and ethical."
