Why does no one in power ever listen to sensible warnings?
As the scale of the financial crisis became clear last year, and governments across the globe stepped in with taxpayers’ cash, it was all too clear that there would be a regulatory fall-out and that it would be driven not just by economic necessity, but by the political need to assuage public anger against financial companies.
Since then, insurance companies of all types and their trade bodies have been shouting loudly: don’t lump us in with the banks.
And what does the International Monetary Fund then do? Propose a blanket tax on financial services firms that yes, you’ve guessed it, lumps insurers in with the banks. The measure, still an embryonic proposal at this stage, was a response to the G20’s request for the IMF’s views on a tax designed to “make a fair and substantial contribution toward paying for any burden associated with government interventions to repair the banking system”. Read that again: the banking system.
This notion of penalising companies for something they haven’t done, because they’re a bit similar to those that have, will be all too familiar to broker readers. One- and two-man band brokers have long had to put up with being classified alongside multinational insurance companies for the purposes of the Financial Services Compensation Fund. And they’ve been charged accordingly, at levels that could potentially put smaller firms out of business within the next few years unless the system, now under review, is radically altered.
As regulation goes mad, the FSA has been quick to get in on the act. The regulator is making as much noise as it can, beating brokers over the heads with diktats on client money, corporate governance and more demanding ARROW visits than ever before.
The fundamental problem with all these things is that regulators and politicians don’t understand insurers, brokers or the industry itself. Politicians think every firm – insurer or broker – is flogging personal lines insurance, and just don’t get the issues that affect the commercial world. Regulators are even worse, and as for Europe – well, let’s not even go there.
So what’s the answer? First, the G20, the IMF, the EU and the rest of the bureaucrats need to pay close attention when the Geneva Association speaks, because they are the experts (80 of them). Secondly, whoever wins the election would do well to put someone in the regulator who understands insurance. And thirdly, when the government comes up with a clever idea for changes to the FSCS, insurance premium tax, or whatever it is next time, it might want to talk to the industry first. IT