The Association of British Insurers’ new report “The Regulation of General Insurance: One Year On” has found that “many customers feel the regulated sales process is too long and contains unnecessary information. In consequence they are deterred from shopping around.” The FSA took over regulation of Britain’s insurance industry in January 2005.
Speaking at an ABI conference on March 29 that launched the report, the Association’s Director General, Stephen Haddrill, commented: “The ABI welcomes the FSA’s intention to review general insurance regulation. Many customers feel they are being bombarded with information they don’t want. That deters them from searching out the best deal. Customers need principles – based regulation to ensure a competitive market that delivers a fair deal.”
The report assesses the impact after a year of the FSA’s regulation of the sale of general insurance and health protection products. “It draws on independent research into customers’ experiences of general insurance regulation and a unique analysis of the benefits of regulation for consumers,” said the bulletin. For example, two “Key findings” from the consumer research determined that “for motor and household insurances, the lengthy sales process is deterring many customers from shopping around and making potential savings.” It also found that “more than half of customers for telephone sales feel that the sales process contains irrelevant information, 40 percent for all sales.”
Among other findings summarized at the beginning of the report are the following:
— the regime is not benefiting many customers. Overall, it costs customers a net total
of nearly £400 million each year;
— the impact on customers varies markedly between different types of insurance:
the costs are higher for customers of most general insurance products, than for
customers of payment protection and health protection insurance;
— customers are not interested in most of the information they have to be given
because of regulation; and
— the regime does not distinguish properly between the risks in different parts
of the market.
To address these problems, we recommend that the FSA:
— replaces over-prescriptive rules with principles;
— adopts a better risk-based approach to supervision;
— develops a better understanding of the impact of regulation on the insurance market; and
— improves its communication with the industry.
The report also recommends that the FSA conduct new research into the impact of regulation on the market and adopt “principles – based regulation which reflects actual risks in different sectors.” The ABI said it “will work in partnership with the FSA to help ensure the regulatory regime delivers the right outcomes for customers.”
The full text of the report is available on the Association’s Website at:
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