New talks on how brokers will be regulated by government are now under way. Insurance Times' panel of experts come up with the questions the FSA needs to answer
Just before Christmas, treasury minister Ruth Kelly dropped a bombshell on the industry. From 2004 brokers will be regulated by government and in particular by the Financial Services Authority (FSA).
Right up until the announcement, the industry expected that the General Insurance Standards Council (GISC) would be the main regulator of UK general insurance broking, with the Institute of Insurance Brokers (IIB) playing a smaller role. Both organisations are voluntary and that is what the government actively supported right up until May 2001, when a treasury press release backed voluntary, self-regulation.
Whatever the reason for this volte-face from distributors of non-life policies (and there are many ranging from disillusionment with the GISC/IIB squabble to a sudden realisation that the directive could not be changed in Brussels), they will be faced with a new and compulsory regulatory framework. And after seeing the impact of FSA regulation on the life side of the industry, brokers and those that deal with them are fearful.
The industry claims there are significant differences between life and general, which mean they should be treated differently. The life and pension industry has suffered many high profile mis-selling cases, while the non-life industry has had more problems with solvency issues of carriers like Independent and Drake.
The life business also deals with large, long-term investments. Policies run for 25, 30 or even 40 years and accrue hundreds of thousands of pounds. Non-life policies run from year to year and most are issued for premiums of hundreds of pounds.
The consultation process started last Wednesday with a meeting of industry heavyweights.
Understandably, not everyone can attend these meetings, so Insurance Times, with the backing of the FSA, is launching its own lobby and you are our lobbyists.
The FSA has promised to answer questions put by the readers of Insurance Times, Britain's biggest broker weekly. This is your chance to make sure that 2004 sees the introduction of a regime that improves the image of the industry. And that it provides a sensible set of regulations, creating a level playing field where the rogue traders who damage our industry cannot operate.
The timetable for the consultation process was
published on the Treasury website ( www.hm-treasury.go.uk/documents ) last Friday. By March, the FSA expects to publish a guide to the consultation process and draft legislation is expected to be published in July, with discussions starting in Parliament in October. The period for consultaion is short, so make sure your voice is heard.
If you would like to put a question to the FSA or make any comments on the process, please contact Insurance Times ( firstname.lastname@example.org ).
The questions that need answers
Will the Treasury or FSA make it clear whether it is beneficial for brokers to continue membership of existing broker regulatory bodies?
If so will this be done before the GISC renewal season starts in May?
Are the regulations intended to cut costs, improve consumer confidence, increase competency, or is it just an exercise in applying the minimum standards of the directive?
Will the regulations cover direct sellers as well as intermediaries?
Will the regulations cover commercial policies and their distribution?
Are the regulations going to improve the quality of policy sales through travel agents and electrical retailers?
How will the FSA ensure that regulations will not put UK distributors at a disadvantage to their European counterparts?
Will the regulations enshrine minimum standards?
Will on-the-job competency be assessed?
Which job titles and specifications will the standards apply to?
The Ombudsman already handles personal lines and small commercial claims; will the broker regulations cover the same ground?