The FSA's CP187 rule book is a 300-page tome that will tie brokers up in red tape and cost them dearly, says John Jackson
The latest FSA regulatory edict, CP187, is a bit like a curate's egg - good in parts. But, it could become more like an erupting Mount Etna - watch with horror and helplessness as the lava slowly engulfs you.
Clearly the pressure from both the ABI and Biba has had an impact on these consultation papers, but one has to ask whether brokers really need a 300-page document to tell them how to run their businesses.
Sarah Wilson, director of high street firms at the FSA, said that most of the rules, and the associated costs, were driven by European Directives. So much for the 'benefits' of EU membership.
However, I became alarmed when she went on: "In very limited areas, such as product disclosure, we could see strong reasons for going beyond the Directives on consumer protection grounds."
British bureaucracy is unrivalled in Europe for its zeal in implementing EU Directives. The British approach is to tackle it with vigour and fanaticism, producing tomes the size of telephone books, whereas on the continent they treat it all as a bit of a joke.
It is right that consumers should have an independent body to which complaints can be made.
However, the proposal to bring insurance brokers within the scope of the Financial Ombudsman Service (FOS), originally proposed under the previous CP 160 consultation paper, is questionable.
Insurers have been settling claims - many frivolous and often fraudulent - because it is cheaper than going to court. The 'easy life' approach by insurers has ensured even more fraudulent claims.
The decision to keep this proposal in CP187 means the dodgy policyholders are to be given an extended lease of life by pressuring brokers in the same way.
As Insurance Times pointed out in its summary of CP187 last week, brokers will pay off a complaint at a level just below that of the fee charged by the ombudsman for handling the claim. The number of claims will undoubtedly escalate, meaning more work - and cost - for the broker.
Yes, this move would be good for consumers, but one suspects the wrong type of consumer. The litigation brigade will be in their element - again.
There is a thin dividing line between sensible regulation conducted with a light touch, and a heavy-handed approach that places intolerable burdens on the broking community.
Again, the burden will fall hardest on the smaller broker. But it is an inevitable consequence of moving from a voluntary to a statutory system of regulation.
Those who shouted long and loud against the GISC have been conspicuous by their silence of late.
Given these latest developments on statutory regulation, they should hang their collective heads in shame.
