Memorandum submitted by Association of
British Insurers
1. RECENTLY-LAUNCHED
ABI CUSTOMER CONFIDENCE
PROGRAMME
Background
— Industry supports FSA Treating Customers
Fairly initiative. FSA has welcomed recent ABI initiatives to
improve customer experience of the Life Industry:
— Company Boards will make key service
quality commitments, and performance against these will be subject
to audit and independent customer surveys.
— Good Practice Guides will be produced
in key areas such as Equity Release and Financial Promotions.
— ABI Paying For Advice initiative aims
to improve the transparency of commission payments.
— ABI is working with Government and FSA
on improving financial capability.
— ABI is a strong supporter of the Retail
Financial Services Forum.
Possible questions for the FSA
— Does the FSA think it will be able
to provide more clarity for the industry on how the success of
the TCF initiative will be judged?
— Will the FSA take account of industry
initiatives (like those listed above)?
2. RISK RATINGS
Background
— ABI fully supports better consumer
information on risk and is developing proposals based on the volatility
of funds. We believe these should be complemented by a standard
approach to identifying the customer's attitude to, and capacity
for, risk. But FSA cooperation is needed and progress has been
very slow.
Possible question for the FSA
— Does the FSA support the idea of
risk ratings?
— If the industry develops a risk ratings
scheme, will the FSA endorse it?
3. BASIC ADVICE/STAKEHOLDERS
Background
— The FSA's new basic advice regime
for the sale of regulated stakeholder products has made a slow
start.
— Some FSA decisions unhelpful, such
as preventing basic advice sales of smoothed investment funds
and a very cautious approach to the stakeholder pension.
— The ABI has worked closely with FSA
and recently published Basic Advice Guidance for our members.
Possible questions for the FSA
— Does the FSA agree that more joined-up
policy making is needed with the Government? (It is hard to devise
a "basic" advice process given the complexity of Pension
Credit.)
— Will the FSA's post-implementation
review be a full assessment of how we can make this initiative
work better and reach new savers?
4. BETTER REGULATION
Background
— The Government has made clear that
the FSA is not exempt from the recent Hampton/Arculus reports
on better regulation.
— The ABI welcomes the FSA's commitment
to proportionate and risk-based regulation, and wants to work
in partnership with the FSA to indentify areas of regulation where
the impact on consumers could be improved. The ABI is currently
looking at areas where regulation may—unintentionally—inhibit
innovation, reduce consumer choice, or limit access to products.
(For example, FSA regulation is currently in danger of inhibiting
the industry's ability to encourage saving via financial promotions,
despite the much less restricted advertising which promotes consumption
or borrowing.)
— The ABI welcomes the FSA's proposal
to simplify its Conduct of Business rulebook.
Possible questions for the FSA
— Can the FSA clarify its approach
to "guidance" as opposed to "rules"?
— What is the FSA doing to train its
supervisors in the challenging task of assessing compliance with
high-level (rather than detailed) rules?
5. GENERAL INSURANCE
Background
— Most general insurance markets are
highly competitive, so the application of regulation (and TCF)
should be proportionate and risk based. (The new sales regulatory
regime results from EU directives, not concerns over customer
detriment.)
— FSA supervision should concentrate
on helping firms to enable customers to make informed purchases.
Where FSA identifies particular areas of concern, it should discuss
appropriate solutions. New rules should be a last resort.
Possible questions for the FSA
— How does the FSA now regard the costs
and benefits of the new general insurance sales regime (which
they estimate to cost £3 per policy)?
6. EU REGULATION
Background
— ABI supports current Government/FSA
efforts to persuade the European Commission against a further
raft of EU financial services legislation.
— Many major Member States (including
France and Germany) have still not implemented the Insurance Mediation
Directive (which gave rise to the new UK general insurance sales
regime—see above), putting the UK at a competitive disadvantage.
Possible question for the FSA
— How does the FSA square its public
stance against "gold-plating" EU legislation with the
stated possibility of extending sales regulations for collective
investment products to insurance products, despite the latter
being excluded from the relevant EU directive?
7. MORTGAGE ENDOWMENTS
Background
— Recent FSA consumer research found
many more consumers have now taken action to deal with their projected
shortfall, following the industry's updating of its Mortgage Endowment
Code of Practice and re-projection letters.
— An ABI-led Endowment Liaison Committee
(including FSA and FOS) is identifying and addressing any problems
from the current round of re-projection mailings.
— ABI data shows that in Q2 2005, 49%
of consumers who complained about their endowment policy direct
to the company involved had their complaint upheld. Of those who
used a third party claims management firm, only 46% were upheld.
Possible question for the FSA
— What is the FSA's attitude to the
claims management companies?
31 October 2005
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