Its rules U-turn will baffle us all, Michael Faulkner fears
' It's been some time since an FSA consultation paper has created a storm of the ferocity that has been whipped up by the regulator's latest paper.
In its quarterly consultation paper CP05/14 the FSA proposes to remove some of the disclosure requirement for insurers dealing with retail customers.
In effect, the proposals mean that a direct insurer will no longer have to tell a customer that it is an insurance company.
Neither will it have to make plain that the product offered has not been sourced from a fair analysis of the market, other than from a single company. Furthermore, direct insurers will no longer have to provide demands and needs statements.
Biba and the IIB have been quick to voice their concerns, variously describing the proposals as "disturbing", "alarming" and "in danger of conflicting with the FSA's statutory objectives".
So why is the FSA receiving so much flak?
The key issue here is consumer understanding. What the FSA is proposing will only add to consumers' confusion when it comes to insurance products, not heighten awareness.
Many people already think that the AA is an insurance company, and may well believe that More Th>n is a broker. So how can the FSA justify taking away a further layer of protection that ensures consumers are fully aware of what they are buying and from whom?
For a regulator that is concerned about the general public's lack of financial awareness such an approach is startlingly misconceived and potentially dangerous.
It also shows a remarkably illogical policy U-turn on the part of the FSA.
It wasn't so long ago that the regulator, following consultation in CP160, extended the Insurance Mediation Directive requirements on disclosure to insurers - the very same requirements that it is now seeking to withdraw. At the time, the FSA said the move was necessary "to provide appropriate customer protection and to avoid customer confusion".
What then has changed? Why will it now no longer be potentially detrimental to customers to remove the status disclosure requirements?
The FSA claims that most of the information is contained within the policy summary, but more detailed analysis does not support this. The status of the insurance provider is not contained within the policy summary, and neither is an explanation of how the product has been sourced - for example from a single insurer or from a fair analysis of the market.
On this basis, the FSA's justification does not appear to stand up.
It was only a week ago that Clive Briault, managing director of retail markets at the FSA, berated insurers and brokers for failing to comply with the rules on documentary disclosure, saying: "Providing consumers with simple, clear and understandable information about products is a key part of our general insurance regime."
The FSA's latest proposal is failing to achieve just that. IT