The British Insurance Brokers’ Association (BIBA) released the key findings of its Future of Regulation research on Monday March 21 at a Parliamentary Reception in the House of Commons, to an audience of MPs, civil servants, Lords and the industry.
BIBA stressed that its research “identifies the limited risks that brokers pose, the contribution of 1 percent to GDP and that the current regulation costs are three times higher than the next most expensive European state.”
Eric Galbraith, BIBA’s Chief Executive, called for a fresh approach from the new regulator, the Financial Conduct Authority (FCA), to focus much more on the limited regulatory risks posed by insurance brokers.
Galbraith pointed out that “the only two significant risks of market failure that insurance brokers pose to the regulator’s objectives are the potential for low quality advice resulting in the mis-selling of products, and the potential for loss of client money,” said the bulletin. “BIBA believes that this should be the focus of new regulation and not the current overly costly and disproportionate system of regulation.
“The research also uncovered the heavy burden of direct and indirect regulatory costs to general insurance brokers in the UK. These costs are three times the size of the second most expensive European State (Ireland).”
BIBA also stressed the “critical contribution made by insurance brokers to the functioning of the UK insurance market. It values the direct and indirect contribution of the general insurance intermediary sector at 1 percent of GDP, equivalent to other more high profile sectors such as the agricultural sector.”
Galbraith stated: “Our members tell me repeatedly that they want certainty and so a more prescribed approach on areas like capital requirements and adequate resources would seem to be more appropriate. We are an important, valuable and low risk sector. This should be reflected in a more appropriate and proportionate approach from the regulator. We would therefore welcome the opportunity to discuss with HM Treasury, the FSA and the new FCA, how this can best be delivered.”
Steve White, BIBA’s Head of Compliance and Training, commented: “The research highlights just how out of line with the rest of Europe the regulatory costs to UK brokers are. Not only are the direct costs, such as the fees and levies the highest by a wide margin, but the indirect costs bear no relation to costs elsewhere in the EU.”
The two reports, The contribution of insurance brokers to the UK economy and Future regulation for insurance brokers, were commissioned by BIBA and carried out by London Economics and CRA. The reports are available for download from the BIBA website.
Source: British Insurance Brokers Association
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