The Financial Services Authority has today set out further details of its post-implementation review into the effectiveness of its general insurance conduct of business regime.
The review is being conducted in line with the FSA’s move towards more principles-based regulation and with its commitment to the Better Regulation agenda.
The effectiveness review began this year and is focusing on how far the general insurance regime, including the conduct of business rules, are delivering their intended benefits for retail customers.
The review will report in the first quarter of 2007 and will make recommendations for rule changes where these are appropriate – any rules proposed would be consulted on in the second quarter of 2007 and would be subject to the usual procedures including cost-benefit analysis.
Experience of GI regulation so far suggests there are greater risks to consumers relating to personal protection, such as payment protection and critical illness cover, than from other general insurance such as household and motor policies.
So the review will consider whether ICOB provides sufficient consumer safeguards for the sale of protection policies. It will also examine whether ICOB delivers benefits to consumers taking out household and motor insurance, and whether there is a case for deregulation in the case of these products, subject to the constraints imposed by the Insurance Mediation Directive and the Distance Marketing Directive.
The review has three main parts:
* Consumer research and desk-based review of the disclosure requirements in ICOB including analysis of the information consumers use when taking out and renewing protection contracts and other types of general insurance. This part will also look at renewal documents for household and motor policies because of concerns raised about the amount of documentation customers are receiving;
* Non-protection products such as household and motor policies the review will look at how far the ICOB rules are effective in addressing any consumer detriment that arises from these products;
* Personal protection products such as payment protection and critical illness policies the review will look at how far the ICOB rules are effective in addressing any consumer detriment that arises from these products.
Dan Waters, director of retail policy at the FSA, says: Effectiveness reviews are part of the FSA’s approach seeking to ensure that its interventions in the market make a real and beneficial difference in practice.
“We are seeking to introduce more principles-based regulation and simplification across the FSA Handbook as a whole in the context of our Better Regulation agenda.
“And the GI effectiveness review presents a good and timely opportunity to look at ICOB in fine detail from the viewpoint of restricting prescription to the point where it is only demonstrably necessary to meet our consumer protection objective.”