The Conservative Party will cut back the powers of the FSA and challenge new EU legislation.
' The Conservative Party's courting of the financial services sector began in earnest this week with the publication of a wide ranging review of the role of the FSA.
In a paper titled Compet-ition and competitiveness: a new agenda, Richard Spring, the shadow minister for financial services, outlined the Tories' proposals for a major cultural shift within the remit of the regulator.
The FSA, the Conservatives argue, is caught up in a culture of regulatory self-protection, which stifles innovation and handicaps UK business.
Spring wants to encourage greater competition in the financial services market and wants business to oversee its own affairs. Measures to achieve these aims are at the core of the proposals, he says.
Spring refers to the "vicious circle" whereby the FSA over-regulates in a bid to protect itself, while the insurance industry is forced onto the defensive.
This misses the point, he says. The FSA must be a champion of industry - protecting the welfare of insurers and brokers, and not just the regulator's own reputation.
One way of doing this, he says, is through the creation of an independent board of directors, which will oversee the work of the regulator and analyse the nature of regulations, particularly those stemming from Europe. The board will be made up of industry representatives, thereby placing financial services regulation at greater arms length from the Treasury.
Spring argues that the intricacies of the insurance market are best understood and represented by members of the industry themselves and not by politicians.
But critics say that in an era of widespread distrust of the sector it remains to be seen how the public will embrace steps towards greater self-regulation.
Is it really reasonable to expect businessmen to look out for the interests of the consumer above and beyond their own financial objectives?
One area likely to impact on the general insurance sector is the Conservative's proposal to distinguish between financial services companies that deal with retail customers and those that deal with business customers.
Spring says that retail customers require greater protection and personal lines insurers should therefore be subject to relatively tighter regulation.
Commercial lines providers meanwhile will see a "lighter touch", the implication being that businesses can look after themselves.
But the fact that the majority of brokers and insurers will offer both personal and commercial lines, means they are therefore unlikely to reap the full benefits of this dual approach.
Another key theme of the review is to assert greater independence from Europe. The Conservative Party wants to protect the insurance industry from gold plating - one of the major criticisms of the UK's adoption of the Insurance Mediation Directive.
The Tories advocate a moratorium on EU regulations which do not explicitly enhance the liberalisation of a single European market. In other words, if EU regulations are detrimental to UK interests, they will not be implemented for a period of 18 months.
This is surely a populist approach, likely to woo sections of the industry currently feeling the pinch from over-regulation. But critics question how willing our continental neighbours will be to allow the UK to pick and choose European regulations.
If the UK is seen to be overly prescriptive, there is the risk that the smooth relations between nations so integral to the liberalisation of the European market-place will be undermined, they say.
A further proposal in the paper is the introduction of a Regulatory Reorganisation Bill, to be introduced three years after assuming power. The bill will examine the whole regulatory process on UK business, said Spring.
"The whole question of the FSA will be open to consideration when we adopt a regulatory reorganisation bill in three years." IT
Key points of the Conservative Party proposals: