Insurers may benefit from the Treasury's proposed clamp-down on check-out sales

Insurers could use upcoming FSA regulation to wipe out any advantage their supermarket competitors hold, senior industry sources have said.

The Treasury released its consultation document on statutory mediation regulation on Monday (see box inset).

An industry expert said supermarkets that sold insurance were faced with two choices under the Treasury's proposals: become FSA authorised, with huge associated training costs, or convince their panel insurers to make them an "appointed representative".

"The insurer would be taking responsibility for a company that may be much bigger and better financed than themselves, which is unlikely to be attractive," the source said.

"Some might see this as an opportunity to renegotiate their relationships."

However, Marks & Spencer Financial Services was unconcerned by the upcoming regulation.

"We're already FSA-regulated for our banking and life products," insurance head Peter Longstaff said.

Tesco and Sainburys said they were still studying the Treasury document.

However, the Treasury document caused chagrin among insurers and brokers by sidestepping the scope of the regulation.

The prospect that travel agents and extended warranty providers might escape regulation was the most contentious issue to arise from the Insurance Mediation Directive.

The Treasury did nothing to allay the insurance industry's fears in its consultation document.

It put forward for consultation three regulatory possibilities for travel agents who sold packaged holiday insurance:

  • No regulation

  • Regulation of the same type given to stand-alone travel policies, which will require FSA authorisation

  • Industry-specific regulation, giving the Association of British Travel continued on page 2

    Treasury proposals at a glance

  • Insurance mediation to come under statutory regulation by the FSA in response to the EU's Insurance Mediation Directive

  • The Treasury published its consultation document on the broad shape of the regulatory regime on 21 October 2002

  • Interested parties have until 31 January 2003 to respond

  • The FSA is expected to publish its more detailed consultation document in the first week of November 2002

  • Individuals, partnerships or companies who undertake mediation "by way of business" will have to apply to the FSA for "authorisation" to do so.

  • Authorised intermediaries will be able to select "appointed representatives" to carry out regulated activities, for which the authorised intermediary will be responsible.

  • Members of Designated Professional Bodies (DPBs) will be able to carry out regulated activities that are incidental to their main profession without authorisation, to be regulated by their DPB.

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