Striking the right balance between consumer protection and regulation will be critical to the FSA's success, says Nye Jones
'The operation was successful but, unfortunately, the patient died'. This was a comment made to me several years ago by a friend who was working in an industry where over-regulation had effectively ground his business to a halt.
Some people in our industry probably share this concern following the Treasury's announcement that the FSA is to regulate the sale of general insurance. However, if we stand back and reflect on the need for a strong regulator to help maintain consumer confidence in our industry, it soon becomes clear that we should be supporting this important development.
Without doubt, striking the right balance between consumer protection and the level of regulation and compliance will be critical for the success of the FSA within its new and broader remit.
But ' of equal importance ' how will it affect the intermediary market? We may be two years away from statutory regulation but, already, there are signs that significant change is afoot. An early prognosis would point towards changes in distribution, product and customer management.
Statutory regulation will probably further accelerate the current and forecasted decline in the number of general insurance intermediaries in the UK. There could well be a period of merger and acquisition activity and a further expansion in broker networks as more intermediaries turn to such distributors for mutual support and protection. Nevertheless, consolidation looks inevitable.
An obvious benefit of having one regulatory body would be a greater consistency and synergy in compliance processes, practices and interpretation.
The present arrangement of two separate auditing bodies for financial services and general insurance business, coupled with varying yet similar processes and requirements, arguably creates unnecessary bureaucracy and a potential disincentive for intermediaries to extend business activity beyond one regulatory regime.
The creation of a common body and standards could act as a further catalyst in breaking down the traditional barriers between general and financial services markets. This could lead to providers and distributors realigning their businesses to deliver propositions embracing both long and short-term business, thus providing a more holistic approach to customer management and delivery. For example, the real benefit will come to those intermediaries trading across the whole spectrum of risk and health management ' in other words, bringing to life customer relationship management and restructuring businesses around the customer, rather than by product line.
Such a change will require courage and an ability to think outside the box. Arguably ' and for far too long ' opportunities have been missed.
The next two years, rather than being a period of waiting for Godot, the outcome should mark the time for intermediaries and providers alike to review strategy and evaluate options.
PPP healthcare, along with other insurers, will be fully co-operating with the Government and the FSA to ensure a smooth transition.
