FSA chief executive insists market's contract certainty data is reliable
FSA chief executive John Tiner has attempted to play down concerns over the quality of data supplied by the London Market on contract certainty. But he was forced to admit that some firms' data was "less reliable" than others.
Last week, Insurance Times reported that the FSA was carrying out an urgent review of the data provided by insurers and brokers. Sources said the move was prompted by concerns over "discrepancies" between the market's figures and the regulator's own data.
But this week Tiner insisted that the FSA had "no fundamental concerns" over the quality of data provided. Speaking at the FSA's annual public meeting he said that the "vast majority" of firms had good-quality data.
Tiner said: "I have heard the concerns at length, but having spoken to people,
I feel the level of reliability of the data is good."
But he admitted that the FSA was looking at the quality of data provided by the market. "We are out on the road checking that what firms are telling us is reasonable. There are firms that are much less reliable, but the sense we have is that overall the quality of data is not too bad."
He added: "We are encouraging firms to have internal processes in place to ensure data is robust and subject to audit and review. The majority of firms are swapping data with each other and checking it."
Asked whether the FSA would be forced to introduce a regulator solution to contract certainty if it uncovered high levels of poor-quality data, Tiner said: "We still expect the industry solution to deliver."
Tiner also responded to the Lloyd's Market Association's calls last week for the FSA to mandate commission disclosure. Reiterating the FSA's recent stance on commission disclosure, he said he continued to favour a market-led solution to the issue of commission disclosure and conflicts of interest.
"I want to give the industry a chance to resolve it itself. We will look at the position later this year and if we do not feel satisfied [with what the industry is doing], we will develop a regulatory solution," said Tiner.
The FSA will attempt to allay industry fears over mystery shopping exercises by issuing revised guidance to supervisory staff and publishing an explanation of how mystery shopping will be used.
The regulator also announced this week that it would be consulting with the insurance industry on its move towards a more principles-based regulatory regime, particularly on its use of guidance notes.
The announcements were in response to concerns raised recently by the Financial Services Practitioner Panel. In its annual report, the panel said there were "anxieties" over the general conclusions being drawn from mystery shopping exercises, which often used sample sizes "that have little statistical relevance".
The panel, comprising senior figures from within the insurance industry, also expressed concerns that the FSA could use guidance contained within speeches and 'Dear CEO' letters to effectively create rules "by the backdoor", without the proper consultation.
This week, the FSA said: "We will work closely with the Panel and other industry representatives as we articulate further what a more principles-based approach means in practice."
It said it would issue a discussion paper later this year on the use of industry guidance.
On mystery shopping, the FSA said:
"We have generally used mystery shopping to gather qualitative information and gain a broad understanding of industry practice in particular areas, not to assess the performance of individual firms.
"We will shortly issue revised guidance to staff on the use of mystery shopping. In response to industry concerns we will issue a statement clarifying the uses to which we will (and will not) put the results from future mystery shopping exercises."