The GISC has published its rulebook. Mary Francis, director general of the ABI has told Airmic that the biggest risks could be emotional – how actions are communicated and how they are perceived by the public, by government and by regulators.
These two issues are linked. The Government declared it was unhappy with IBRA and weren't we all? Instead of stopping unregulated traders, the IBRA allowed them to trade on but simply stopped them calling themselves brokers.
But now the wrong image has gone out. The GISC was set up, it appears, not to impose tough standards on the industry and to cut out the cowboys but to devise a regime that allowed everybody selling insurance to continue with the minimum of disruption. To that end, brokers, who have faced what they perceive as the toughest regime, will continue to be heavily monitored while others get a lighter touch. That is the emotional perception.
To expect it to regulate every insurance seller to same degree is now unrealistic, swathes of the industry would go out of business, including several IBRC-registered brokers. But it has to step up the regulatory regime on those treated too lightly. It has to explain to the industry and the public that it does regulate different groups with a lighter touch, why it does that and that those intermediaries come with either greater risks, greater onus on the individual or less consumer protection. Consumers must then choose to take the risk themselves or go to a more heavily regulated broker.
Mary Francis said the Government imposed IPT as a backlash against pension mis-selling and it is still a soft target for further tax attacks. It remains a target for regulatory attacks too. To pretend that all intermediaries face the same standard of regulation when they do not will provoke the emotional backlash the industry fears most – direct FSA regulation.