While Halifax General Insurance will begin to underwrite for the majority of its customers, areas such as commercial lines are still broked. Bearing this in mind, how do you think FSA regulation of the sales process will affect you?

It sounds a daft thing to say but I'm not concerned by regulation at all. The principle reason is because the way we deal with our customers and our information and records is at such a high standard. We're probably even ahead of where regulation wants to take us. This is because we're part of HBOS, which is strongly regulated in different sectors of the marketplace. We've built the general insurance business over the past six or seven years on the basis of expecting regulation. There are elements of bureaucracy that don't seem to make much sense. What we've tried to do as part of the processes for the consultation document is talk to regulators and put our viewpoint across. In some cases this has made them rethink their decisions. We believe it has anyway.The biggest concern for me is that regulation adds bureaucracy to what we do - there's no two ways about that. Most of it is positive, but because it is a layer of bureaucracy and a layer of extra form-filling, it raises costs to the business. Realistically, despite what anybody else would say, those costs are going to be passed back to the end consumer.The advantage from our perspective is that we have new systems and new processes because we are a relatively new business. So most of that has already been absorbed into our business. We reckon we're 99% of the way there.

How far down the chain will you have appointed representatives?Ultimately the buck stops with me. But we have been talking a lot about this and one of our ideas is that we have a risk management department. I don't actually like the phrase 'risk management'. I want to change the risk management department to risk advisers, because risk management is carried out by everyone who's involved in the business, whether it's somebody who's answering the phone or me. We are actually the risk manager for that particular risk, and it's an ethos that we're going to really focus on in the first quarter of next year as part of the regulation process. The message has to be 'it does stop with you, make sure you control it'.

Who do you see as your closest rivals?Lloyds TSB and Royal Bank of Scotland (RBS) are our rivals. We're pretty similar in some ways to RBS. We underwrite home insurance and we now have third party relationships - we do the Sainsbury's home insurance business, for instance. In a sense, RBS is nearer our model than Lloyds TSB is, because the Lloyds TSB model is not necessarily about taking risk, it passes on some of the risk. We'll be pretty close to Direct Line and Churchill in terms of home insurance. This year we will have 150,000 customers and half of those will be direct rather than through the branch network. We have a competitive product range and we're aggressive, so we'll be looking to grow that next year.We have modern, five-star products and the next stage for us is to use this to compete in the direct household market.

You have plans to grow the commercial lines business substantially. How's that going?We've just rebranded from business insurance to commercial insurance. That's because we used to align ourselves with business banking, but that doesn't exist anymore.We put all our SME business on to Royal & SunAlliance (R&SA) in its Leeds and Glasgow offices. And the larger, riskier stuff, like chemical plants and big corporations, we pass on to Marsh.The first stage in the developments was setting up processes and systems, making sure everything works, and that the business bank, the commercial bank and the people who go on the road selling were all comfortable that we could deliver. What Peter Thompson's [who has joined as head of commercial from R&SA] job fundamentally is, is starting to drive that business up. We have the sausage machine, it works. In fact we've used Acturis and it works very well. What we have to do now is to put more business through to make it more profitable.

But don't small business customers hate their banks?A lot of small businesses used to hate their banks, and with justification, because most of the banks were ripping those customers off. But now clients are moving to us. Many of those businesses moved to us because they wanted credit and loans and we have good products and rates. Once a relationship of trust is built, they decide they may as well move their insurance to us as well.A month ago HBOS chief executive James Crosby had to answer allegations of mortgage mis-selling when it was revealed that sales people were encouraging house buyers to lie about their salaries to obtain huge loans. That must be a wake up call for any board director?It's all down to controls. What we've historically had with R&SA is an agreed set of controls and processes. So over the past nine months we've been analysing those controls and processes to make sure that they fit with the way that HBOS manages its customer relationships and the way it manages risk. I'm willing to bet that if you were to look downstairs at what people are doing in our call centre, Mr Smith won't be thinking the same way as Mr Jones, or Miss Proctor. We have to make sure that if they are doing things differently, those variations are within the controls we set. What we can't have is the type of people who go off and do things that cause problems for our customers or actually circumnavigate the regulation. That's the process that we're doing at the moment.It is fashionable for insurers to outsource at the moment. Now that Halifax is a risk carrier will you be outsourcing?Why would you outsource? No, I provide a customer service, I don't want someone in a third-party company to manage that for me. My customers want to deal with me, they don't want to deal with somebody else.Many companies are moving capital offshore in order to take advantage of solvency rules. Is that something that would interest Halifx?If you're dealing with the Halifax, you want to deal with the Halifax because of what the brand stands for. It doesn't stand for trying to do some shoddy little financial deal out in Gibraltar to save yourself £4.50. If I were a Halifax customer, I would be happy knowing that I am being regulated by the FSA, with the right amount of capital.