The FSA needs to learn lessons from past attempts at regulation if it is to avoid disaster, said John Greenway MP, director of Smart & Cook, in a speech this afternoon.
Speaking at the Xchanging insurance market conference, Greenway said past attempts at regulation had been a catastrophic failure. "Significant parts of the financial services sector have been regulated out of existence, while regulatory costs have risen sharply for those who survived."
He said past regulation had eroded customer choice and nurtured compensation culture. Greenway warned the introduction of regulation must not lead to a similar situation in insurance.
Greenway expressed concerns of the cost of regulation for the broking industry. "The level of fees and the potential exposure to both compensation levies and the ombudsman will make life extremely difficult for many smaller firms."
"The new regime will be tough and challenging to brokers and we have to hope that the benefits of regulation prove worthy of the price."
He did see positive elements in regulation, however. Greenway said: "Rationalisation will provide the London market with the opportunity of securing business from the resulting larger firms and networks which previously had little, if any, direct access to the Lloyd's community."
It would be hard to argue that some form of regulation was not needed, added Greenway.
