Regulators see industry as ‘remote, inaccessible and a little bit stuck in the past’
The FCA and PRA have a ‘relatively poor understanding of the insurance industry’, according to a survey by law firm Berwin Leighton Paisner (BLP).
The survey also found that companies in the insurance industry believe the two regulators need to consider the longer-term impact of their actions on consumers, and that some insurers and brokers feel they are treated unfairly by the regulators.
BLP conducted a survey of financial services companies to gauge attitudes to the new regulators a year after they took over from the FSA in April 2013.
Thirty-nine percent of the respondents were from the insurance industry, 27% from banks, 11% from investment managers and 23% from other financial services.
Most respondents to the survey felt that the PRA and FCA had an adequate or good level of understanding of their business. Most criticism came from insurers, however.
BLP said: “This suggests to us that the regulators may not yet be as familiar with the insurance markets as they are with some of the other markets they regulate.”
Also, while most respondents felt the regulators were focusing in the right areas, insurance industry respondents felt that the FCA needs to think through the longer-term implications of its approach to consumers before deciding on costly interventions.
Furthermore, although most respondents felt the regulators were treating them fairly, those who did not were almost all insurers or brokers.
BLP said: “We wonder, therefore, whether the shortfall in sector-specific knowledge that our insurance sector respondents have highlighted is introducing an unnecessary level of tension into the regulatory process for insurers.”
Stuck in the past
BLP financial services investigations senior associate Polly James said: “I was seconded to the FSA shortly after it took over responsibility for general insurance in 2005.
“While a lot has obviously changed at the regulator since then, I sense that there is still an element of the ‘dreaming spires’ in the regulators’ perception of the insurance industry – it’s seen as remote, inaccessible and a little bit stuck in the past.
“I think that’s unfortunate, and I feel it contributes to the increased level of enforcement activity that we are witnessing. More needs to be done to get insurance companies and their regulators onto the same page, to make the supervisory relationship more fruitful.”