It’s generally a very positive vibe, the insurance sector can see the opportunity;
Arabella Ramage, Director of Legal and Regulatory Affairs, Lloyd’s Market Association (LMA)
“The Financial Conduct Authority (FCA) consultation paper Simplifying the insurance rules published recently shows that it has been listening to the wholesale market’s concerns about the absence of differentiation in regulation between consumer and other insurance business. The LMA has been a key stakeholder of the FCA in the run up to this consultation, having hosted and facilitated roundtables with the FCA to discuss what is proportionate and practical. This is a welcome change of approach from the FCA.
The proposed new definition of commercial risks business, alongside a widening of the bespoke product carve out, should be a material difference for our members in the Lloyd’s market.
Aligning the rules on product governance to Financial Ombudsman eligibility will help to make the rules more proportionate going forward. The proposal that in a subscription market the followers should be able to rely on the lead insurer for compliance with the rules is also welcome. This should make it easier and less duplicative for insurers going forward. But the proposal that the lead should be the sole party responsible to the insured for redress may need the Lloyd’s market to think about new lead/follow clauses. There is a missed opportunity to recognise the role of managing general agents and their role in developing products, by excluding brokers from being designated the lead.
Our members will welcome product monitoring moving from a uniform 12 months to a frequency that is appropriate based on the risk of consumer harm.
Finally, the consultation on disapplying FCA rules where customers and insured risks are located outside the UK is also welcome. This is something we have been requesting for some time, recognising that many jurisdictions have strong protections in place, policed by their own regulators. With over 85% of Lloyd’s business originating from outside of the UK, the possible changes in geographical scope could be a significant benefit for the Lloyd’s market. We will, therefore, urge the FCA to take this forward as soon as possible and use its accelerated consultation process.”
FAIRER SYSTEM
In response to the FCA plans announced to remove ‘outdated or duplicated’ insurance rules, James Daley, managing director of consumer group Fairer Finance said:
“While we agree with the regulator removing duplication in its rulebook – and agree that Consumer Duty supersedes many of the old rules – this is undoubtedly a fragile moment for the consumer protection landscape. Consumer Duty is still in its infancy – and many firms are falling well short of the high bar that these new rules set. Removing old rules still feels a little premature, with the FCA seemingly scrambling to meet the Government’s deregulatory agenda.
“It’s important that the FCA continues to emphasise the importance of Consumer Duty – and replaces any rules that it removes with very clear guidance around its expectations. There is a danger that some firms will sense that the pressure is off – and will see this as a moment to halt the progress that the Duty demands.”
KENNEDYS SEES INNOVATION THRIVING
Ash Daniells, legal director at Kennedys, comments on the FCA’s announcement on simplifying insurance regulation:
“The changes seek to simplify insurance regulation by removing duplicated or unnecessary rules from its handbook. This, in turn, will make the insurance market more agile and competitive while still protecting customers.
“The announcement is part of FCA’s ongoing efforts to modernise regulation in line with its new Consumer Duty principles, which focus on good outcomes for customers rather than rigid compliance. The reforms should ease the regulatory burden on insurers, especially those in the commercial market, allowing them to innovate and deliver better service, more efficiently. It’s clear the FCA is keen to maintain its focus on consumer protection, however it is positive to see that barriers which no longer serve their purpose are being removed.
“The proposals will mean insurers have more room to develop innovative products and respond quickly to market changes.
“The proposed changes aim to reduce regulatory complexity and give insurers greater flexibility, particularly when serving sophisticated or commercial clients. Whilst it will mean fewer prescriptive rules for insurers, they will also face greater scrutiny if their interpretation of “fair outcomes” is challenged by the FCA. It is positive to see a shift to a more flexible, principles-based approach, however it will also create uncertainty, particularly for smaller or mid-sized firms lacking sufficient compliance resources.”
Be the first to comment