Latest FCA regulation around fair pricing and value is straining broker relations
By Content Director Saxon East
Ahead of the implementation of the FCA’s general insurance pricing reform rules, experienced BGL motor and home broker chief Mark Townsend warned that “some [businesses] just will not survive”.
The threat of firms going to the wall because of the FCA’s intervention marks a new stage in the tortured relationship between brokers and FCA.
From brokers’ point of view, the FCA is constantly intervening in their business. As well as the cost of regulation, the entrepreneurial spirit of brokers is being hampered by regulatory imposition.
Personal lines brokers can compete with direct players by offering specialist products and services, but if their innovation is suffocated by the regulator, then the task is near impossible.
Meanwhile, they watch passported insurers coming into the UK and collapsing, leaving customers in a mess. The FCA is seemingly unable to prevent this happening.
The cost of the collapsed insurers is then absorbed into broker regulatory fees via its funding for the Financial Services Compensation Scheme (FSCS).
Poor conduct
The FCA believes that customers are losing out because of poor conduct and practice - and it is the regulator’s job to protect them.
First the regulator was concerned about misselling. Now it wants to stop ’double charging’ in SME - where clients and customers pay both admin fees and commissions across various distributors.
In personal lines, the FCA wants to prevent unfair pricing practices which see vulnerable customers paying more.
Broker pain
What is clear is that the brokers, above all others, feel the pain of the FCA.
The insurers have big teams of people to handle compliance. They are largely well-paid managers and not the shareholders.
Broker chief executives and managing directors are frequently the equity investors in their business. They’ve put their own money in and taken the risk. They feel the pain more.
It is worrying when they see everything they have sacrificed at risk of being diminished by regulation.
Looking forward, the implementation stage of the latest round of fair pricing and value rules has not even begun.
The strained relationship will probably get even worse before it gets better.
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