Regulation refresher – how is the insurance sector's favourite subject developing?
Insurance Times
The leading information, analysis and insight brand in UK general insurance, part of Newsquest Specialist Media Ltd
By deputy editor Yiannis Kotoulas
We at Insurance Times have written extensively about regulation, with our coverage of the subject often in the lead position for what our audience engages with most.
This is to be expected – not only are updates to the rules governing the sector vital to understand, but they are often controversial too.
Take the FCA's Consumer Duty, for example – when it came into force on 31 July 2023, there was widespread approval of what the regulation aimed to achieve.
Better outcomes for customers via a focus on fair value, consumer understanding and consumer support are eminently popular goals among brokers.
But the way Consumer Duty has been implemented has heaped more reporting responsibilities on already stretched brokers, with smaller firms hit particularly hard by the new requirements to demonstrate what they're doing to define, assess and evidence good outcomes.
During the Biba Conference 2024 last month, trade body chief executive Graeme Trudgill noted that he had been contacted by one such smaller broker to say that the firm had had to close because of the increased regulatory burden.
Indeed, BIBA 's 2024 manifesto included research from London Economics that showed average regulatory costs had increased by 40% since 2019, with UK brokers experiencing higher costs than their equivalents in countries like Spain, Germany and New York state.
More costs coming down the line?
Brokers were therefore delighted to hear, during another session at Biba 2024, that the FCA was not planning to introduce any new packages of regulation.
But, speaking to Biba regulation director David Sparkes , FCA chief operating officer Emily Shepperd did offer an update on what the insurance sector could expect.
News of no new tranche of rules was well received, especially since prominent brokers like Stuart Reid told me that regulation – alongside insurer service – was the biggest challenge brokers are currently facing.
And although there will be no new rules as such, Shepperd did explain that the FCA would renew its focus on elements already within its remit and continue to "take action where appropriate".
We have already seen the impacts of this attitude, with the regulator not shy about bringing down the hammer on sales of guaranteed asset protection (Gap) insurance.
Several firms have now been allowed to recommence sales of this product with the proviso of "materially lower levels of commission" being paid out to improve value for customers.
Gap insurance is not the only product that could see FCA enforcement action either, with the regulator taking an interest in the implications of the premium finance model too.
And writing in Insurance Times back in April, Insurance DataLab co-founder Matt Scott even questioned whether travel insurance could be next in line for regulatory investigation.
Election impacts
The industry has got the message the increasingly assertive new FCA is sending around fair value – both the ABI and Biba have released information for their members around improving premium finance.
This is essential too, as Fairer Finance's James Daley noted that the industry must increase consumer trust if it is to avoid government intervention.
It may be all too little too late however, as a major worry for the sector around government intervention reared its head last week.
There's a lot of ifs that have to happen first, but The Labour Party shadow transport secretary Louise Haigh has noted that a potential new government would call on regulators to investigate increasing car insurance premiums.
Whether or not that suggestion sets your heart racing may be a matter of perspective, but government involvement in such a significant portion of the insurance sector would surely require a raft of new compliance measures from the industry.
Interestingly enough, Labour's shadow City minister Tulip Siddiq told an audience at the ABI Conference this year that her party was committed to "streamlining the regulatory burden" for the insurance sector if it were to get into power.
As is ever the case with regulatory moves, the insurance sector has not seen the end of new rules and requirements. We can only hope that any new responsibilities are consulted on with the industry to ensure that regulators' laudable goals are met with workable methods of implementation.
Deputy editor
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