The FCA’s boss must curb his enthusiasm for cracking down on low-value GI products
Incoming Financial Conduct Authoity (FCA) boss Martin Wheatley is right to want to crack down on certain low-value general insurance products. There are still plenty of poor practices in the industry.
But he must be careful where he wields the whip. Plenty of so-called add-on products still offer tremendous value. Take legal expenses insurance: if sold and handled correctly, it opens the door for high-quality legal support for potentially millions of people who would otherwise be priced out of using the courts. Brokers can take large commissions from the product, but that’s because it can be time-consuming in the event of a claim. Wheatley must remember that not everything is black and white.
Lessons from Groupama
It’s interesting that Ageas UK chief executive Barry Smith is seeking a standalone financial strength rating for his company (page 6). The recent experience of the UK insurer he is buying, Groupama Insurances, shows just how essential a top-tier financial strength rating is to an insurance company. Groupama Insurances’ French parent, Groupama SA, took a risk in loading up on Greek bonds and ended up paying the price of a sub-investment grade rating. Not having its own rating, Groupama Insurances suffered too.
The ABI deserves credit for this year’s launch of the Insurance Fraud Enforcement Department (IFED) and the fraud register. An interview with IFED boss Dave Wood this week (page 16) shows a great determination to bring results for insurer partners. These initiatives show the great benefits that industry co-operation can bring. Next up is the ground-breaking plan for insurers to electronically access the DVLA database: this offers a profound effect against fraud. But the scheme could also sink beneath a sea of government and DVLA red tape. The ABI will be worth its weight in gold if it can help deliver this by the 2014 target.