The Financial Services Authority has reported a positive outcome to its recent nationwide investigation into the level of unauthorised general insurance business being conducted following the start of general insurance regulation in January 2005.
The FSA visited more than 1700 firms around the country that were potentially conducting insurance mediation activities illegally. This included visits to both potential primary intermediaries and secondary intermediaries.
The FSA found that only two primary intermediaries and 14 secondary intermediaries were wilfully acting illegally. Where breaches were inadvertent or resulted from genuine misunderstanding, the FSA worked with the firms to ensure they stopped doing the business, became authorised or restructured their business so that they did not need to be authorised. In the other cases, the FSA took steps to stop them doing any further insurance business.
Clive Briault, managing director for retail markets at FSA, says: “Policing the perimeter is a vital part of our work to protect consumers, who do not have the safeguards of regulation, or access to statutory redress and compensation, if they deal with unauthorised firms. We have been impressed with the level of understanding of the new rules in both the primary and secondary insurance markets, with most firms aware of the need to be authorised if they undertake regulated activities.”
The work on secondary intermediaries focussed on motor dealers, travel agents, high value retail outlets, removal, freight and storage firms, and property managers. Within these sectors most firms had sought legally to avoid regulation by either restructuring their documentation or business model or ceasing insurance related activity altogether.
The FSA undertook a similar perimeter exercise with the mortgage sector earlier this year.
The FSA will continue to monitor both the mortgage and general insurance markets and will follow up leads where appropriate, to prevent firms operating illegally.