Fining insurers for delays in settling claims is bureaucratic rubbish, says John Jackson

Regulation, to slightly adjust a well-known expression, is the curse of the working classes.

Usually, it is imposed by people not in the commercial world (that is, politicians and bureaucrats) on people who earn their living in the real world.

The latest piece of regulatory nonsense to emerge into the world of general insurance is that fines should be imposed on insurers who do not settle claims fast enough.

This is to be imposed by the FSA, says managing director John Tiner, because he has "anecdotal evidence" that insurers are slackers in this regard.

It is a good thing he did not take up the law as a profession.

"M'lud - I have anecdotal evidence that the accused is guilty."

One can see the icy look on the judge's face.

"Yes, Mr Tiner - but do you have any facts?"

"Facts, M'lud?"

It is true that some insurers are less swift at settling claims than others. But in plain language - not bureaucrat-speak - "anecdotal evidence" means "gossip".

How would such fines work in practice? How do you tell the difference in the time taken in settling a claim between a motor policy and one for household or travel?

Within, say, a motor policy, how do you work out how swift a claim has been settled for a simple knock as against theft of the vehicle?

On household, how do you put into a timescale a claim for loss or damage to contents, as against wind blowing down a roof? On travel, how do you put a time limit on lost or stolen luggage as against personal injury?

And what of legitimate investigations by insurers into possible fraud?

What is important with a claim is not how fast you can settle, although delay through incompetence is unacceptable, but ensuring that it is settled for the right reasons and on the right terms.

This rubbish from Tiner underlines what a backward step it has been to bring general insurance under statutory regulation. Those who have sought to undermine GISC self-regulation can now see the kind of world into which the industry will shortly be plunged under FSA rule.

The trouble with the bureaucrats is that they can find a regulation for every conceivable incident. But Tiner is overlooking a simple fact of insurance life.

By far the greatest "regulator" in the insurance market is the consumer. As any insurer - or broker - will tell you, give a policyholder a bad time on a claim and you have lost them - usually for ever.

They also tell their friends.

Regulation? The best regulator in the world can be summed up in two words: market forces.

And for that you do not need a bureaucrat.