The FSA's decision to re-consult is good news for the insurance industry for two reasons.
First and foremost it gives the industry an opportunity to obtain a client money regime that is practical and which meets the needs of brokers and insurers.
Secondly, it is further demonstration that the FSA is prepared to listen to the industry and adapt its regulatory regime.
But the FSA's decision to re-consult is just the beginning of a crucial process for the industry. If insurers and brokers are to obtain an acceptable client money regime, there is much work that still needs to be done.
The FSA has said that it will present one option for consultation when it publishes its paper in July. Although it has refused to give much detail on the proposal's precise nature, the regulator has said it will be based around the concept of co-mingling of insurer and client monies, albeit within a more structured framework than that contained within its transitional provision.
It is likely that the proposal will have been heavily influenced by Biba's submission to the FSA in which it advocated a hybrid client/insurer money account. The FSA has also done its own work on the matter, so this will have a bearing on the consultation.
The challenge now for the industry will be to respond to the consultation with a unified voice. The one thing that will dissuade the FSA from making changes will be divergent responses.
The industry has shown it can work together on client money issues, and the recent ABI/Biba meeting is a case in point. Insurers and brokers must continue this collaboration or risk wasting the previous months' hard work.
The FSA has given the industry one chance. It must not be wasted.
Michael Faulkner
