Possibility of lighter touch regulation

For all the media coverage of Gordon Brown’s newfound willingness to say New Labour in his key address last week, the ears of industry policy watchers were primed for two different words. As it transpired, ‘regulation’ and ‘mortgages’ were absent from both the Prime Minister’s and the chancellor’s speeches.

Cynics hoping for a repeat of Tony Blair’s unscripted criticism of the Financial Services Authority earlier this year were disappointed. Blair said in May the regulator was increasingly perceived as being “hugely inhibiting of efficient business”. The absence of further pandering to business interests in this vein no doubt comforted FSA chairman Callum McCarthy.

Aside from the party conferences, discussions of possible reviews for the mortgage and general insurance regimes positively abounded closer to home. A Mortgage Strategy readership poll found 77% of readers backed IMLA’s calls for a review of the Mortgage Conduct of Business Rules. The FSA has repeated that an MCOB review is not imminent but it has set a date for a review of the general insurance regime. Announcing the decision at the Chartered Insurance Institute Annual Conference recently, FSA retail markets director Clive Briault named April 2006 as the start date for its review.

The positive news here is that opportunities to lighten the regulatory burden may exist where certain rules have proved ineffective. The outcome of such a review is of course far off and in the meantime companies remain bound by the GI rules introduced in January. Despite some positive signals from the FSA’s mystery shopping and other thematic work, Briault added that selling practices in some areas are not meeting its standards. FSA teams examined the payment protection sales practices of a range of firms and have more planned later this year.

While regular PPI policies sold alongside prime mortgages were considered to meet the rules, notice was given that this was not true in other sectors. The FSA added that pressure is being applied to companies to address problems that may have existed in the past, such as checking clients’ eligibility for protection policies.

So, opportunities to lighten the burden on companies may emerge in 2006. But these will only arise once the existing rules themselves have been understood and adhered to.

l Small firms may be interested in attending a series of forthcoming GI surgeries across the UK. For details visit www.fsa.gov.uk/pages/Doing/small_firms/insurance/ index.shtml