Speak up now, the FSA has to listen

The oddly named high street firms division of the FSA is a new force in financial services regulation that is not to be under-estimated. It is responsible for implementing the Treasury's announcement that general insurance and mortgage intermediation will be regulated by the FSA.

Anyone selling general insurance to the public, who thinks this will not involve a sea change in the way their business is regulated, is in for an unpleasant surprise.

In the first place, the FSA is assembling a powerful group of young high-flier regulators whose reputations will be on the line. This guarantees a brisk order of business and a pretty crisp analysis of what needs to be done. The industry can look forward to a steady stream of consultation papers, which set out the new regime. It is always an option to be too busy with pressing day-to-day matters, but the forthcoming consultation provides a vital opportunity to practitioners to become involved in shaping the new regime.

Some practitioners may think their comments are a waste of time and that the FSA will not read them. But the FSA is under a statutory obligation to consult on rule changes and generally applicable guidance. It follows that it must be able to demonstrate that it has read every response to a consultation paper. In practice, FSA officials would far rather have a heavy response than a light one to a consultation paper, because it makes their job easier. When they have a substantial response, they are more likely to get a true view of what people think than a false one .

There is also the very substantial question of what kind of regime to expect and whether it can be influenced. It seems reasonable to suppose that the FSA will work from a basis with which it is familiar. The structure of the FSA rules handbook is an integrated one, avoiding overlap and duplication. It follows that the FSA will use the best and most appropriate elements of the existing conduct of business regulatory regime for investment products and apply them to general insurance.

Moreover, there is a need to make the new regime consistent with the new one for mortgages and the current one for investment products, in areas such as the standard of independence and status disclosure. Such issues will be looked at from a consumer, not an intermediary or manufacturer, perspective.

All of this implies that comparatively little of the GISC approach will be carried over. This is not so very surprising, since voluntary and obligatory systems might be expected to look very different. This makes it imperative that the industry engages thoroughly with the FSA and prepares for a very different world going forward.

Lord Hunt is senior partner of national law firm Beachcroft Wansbroughs and chairman of the newly-launched, regulatory consultancy Beachcroft Wansbroughs Consulting.