FSA to probe effectiveness of GI regulation next April

The Financial Services Authority is to conduct a review in April 2006 into the effectiveness of the general insurance regulatory regime.

The focus will be on Retail Conduct of Business requirements and how successful general insurance regulation has been.

Clive Briault, managing director of retail markets, revealed the FSA’s plans at the Chartered Insurance Institute’s annual conference last week.

He says: “If the review leads us to conclude that changes to our rules and guidance are necessary, we will consult on these in the usual way.”

But he did say any possible changes could be hampered by European requirements, in particular those in the Insurance Mediation Directive and the Distance Marketing Directive.

As part of the review, the FSA is looking for feedback from the industry on which areas could be improved. Consumer research will also be used to show whether the intended benefits of the regime are starting to emerge and whether consumers are making good use of the information provided. Checks will also be made that the industry is complying with the regime.

In his speech Briault praised the sale of payment protection insurance in the mortgage market. The regulator has been conducting a review of PPI to establish the risks it poses when linked to other financial products.

He says: “We have just completed a series of visits to look at PPI selling in firms ranging from high street banks to motor dealers and small mortgage intermediaries. Our findings are variable. Some firms demonstrated good compliance with our rules.

“We found that regular premium PPI sold with prime mortgages seems generally compliant but selling practices in other sectors are poor.

“We are determined to improve standards in this market and intend to publish in November examples of good and bad practice so firms know what we expect from them.”