Eric Galbraith says that removing rules for insurers would confuse consumers
When the FSA set out its high level approach to regulation in CP160, it stated: "Government has decided to extend conduct of business regulation to insurers as well, to avoid consumer confusion and to create a level playing field."
To the best of my knowledge the government has not announced a U-turn on this position, yet the FSA has started to reduce the disclosures that insurers make and is now hinting at "deregulation" for certain products.
Why is this happening and is it treating customers or the intermediary sector fairly?
Biba responded to the proposed rule changes in late 2005 by focusing on the likely confusion that removing certain disclosure requirements from insurers might lead to. We also suggested that these could potentially conflict with statutory obligations placed on the regulator by the Financial Services and Markets Act 2000.
More recently, terms like 'deregulation' are being mooted by the FSA for low risk products, which I support, but of course the regulator cannot remove rules where a Directive requirement exists.
The likelihood is, therefore, that the FSA may propose that further rules be removed for the benefit of insurers, but not necessarily for the benefit of their customers. Let me explain why. Biba carried out independent research into the problems of consumer confusion.
The results, which we have given to the FSA, show that the proliferation of brand names advertising directly to customers plus the blurring of the lines that clearly identify insurers and intermediaries are leading to a confusing cocktail for consumers. This uncertainty sits uncomfortably with both the FSA's statutory obligations and with the work it is leading to increase consumer financial capability.
It would be easy to leave this issue as one for the regulator to address but, in the spirit of treating our customers fairly, Biba has taken the bull by the horns. We have started to help both our members and their customers by providing some clear messages to consumers about exactly what the role of the intermediary is and the benefits of choosing a professional adviser to arrange insurance.
Better informed customers are, in the longer term, likely to make better buying decisions. It should be the aim of the regulator and the intermediary sector to increase consumer demand for advice on insurance products, rather than reducing the process to the lowest common denominator, such as price.
Deregulation, less regulation, principles-based regulation - absolutely fine. But, if the possible FSA U-turn is now regarded as treating customers fairly then let us make sure there is a level playing field, that is, the same suite of disclosures irrespective of the customer's route to market. IT
Eric Galbraith is chief executive of Biba