Letter to the editor: The FCA misses the point

Last week, I read the briefing articles by both Toby Clegg and James York, which I believe miss a fundamental point when addressing how the sector can improve its image.

Everyone involved in insurance is drowning is a tsunami of regulation that knows no end. The sector is taking on compliance people at a rate of knots while trying to decipher the ‘guidance’ spewed out by the regulator ad infinitum to validate the numbers it iself is taking on – and for what purpose?

It’s always talked about quietly, but it is time everyone registered their objections to the amount of unclear, incomprehensible regulation the FCA churns out – which is read by few and understood by less.

The notion of industry engagement through discussion papers actually leading to new regulation is misleading, as there is nothing requiring the FCA to incorporate any ideas or amendments offered by contributors. This makes the notion of discussing anything a joke and is a misrepresentation of what actually goes on.

Why has there been such a kerfuffle about Consumer Duty? No company operating in the insurance sector is going to say that their policies don’t represent good value and, with brokers not having access to every supplier, the FCA’s understanding of what the market is offering has to be questioned.

Cut and thrust

Treating customers fairly was the headline that said it all, but it needed teeth.

Consumer Duty, on the other hand, has caused good policies to be no longer offered to customers because the paperwork required by insurers is insane.

Because of this, the regulator has, in fact, caused markets to contract, resulting in less competition.

Additionally, whatever rules are removed in the name of streamlining regulation is always going to be replaced with more.

I firmly believe the public is getting tired of endless exemptions and exclusions added in to policies to avoid more liabilities. I don’t doubt these are necessary, but we all need more plain speaking.

Clegg is right to promote the useful, albeit hidden, benefits that insurance offers to customers and wider society. But, first, the public needs to understand more about the sector so they know where they stand.

Unfortunately, they never will whilst the FCA is run by people who mean well, but spend all their time justifying their own jobs.

Less can be more and the cost of compliance and regulation needs to be fully addressed. Why not revert to colour-coding policies for complexity? Orange could be basic, blue can be more complex and yellow can be all-singing and all-dancing.

Suffocating rules

When people are spoken to like adults, they understand. But insurance regulation and compliance has become an ever-growing cancer on a valuable and central part of our sophisticated modern economy.

What is more, it is the deliberate and overriding desire to delay reducing the burden of that regulation that turns professionals in our sector off all the time.

It is strange that insurance journals are reluctant to criticise the FCA when it alone is causing the most damage to this industry.

It’s about time the rules were made simpler and there was a real cull in regulation – and I’m talking 40%.

Technology has forced that reckoning, but the guidance we work with still relates to another era.

Let’s please not forget the FCA’s predecessor, the FSA, was saddled with insurance regulation unwillingly and decided to apply its banking rules to our sector which, while a simple solution, did not acknowledge the massive differences between the two industries. 

Finally, the FCA can say all they like about how non-averse they are to insurance firms making a profit, but they speak with hollow words. If there are differences between suppliers and the covers they provide, the adult public must be trusted to to decide what works for them, as long as they are properly advised. 

The public do not needs molly coddling. By all means maintain an index of words and explanations, but keep the policy literature down to 10 pages unless it’s a bespoke policy.

The FCA keeps poking its nose into every nook and cranny to keep itself busy, but one clear question need to be asked. Who is guarding us from the guards?

At the moment, it looks like no one is.

Simply, the level of regulation and the staffing involved in complying with it is simply out of control.

The FCA should stick to making unassailable rules that are clear to all. Let market forces operate within the same framework and by slicing away at the out of control, unnecessary cost of regulation.