Regulation has mixed impact on life insurers - Fitch

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Auto-enrolment will be a positive for life insurers but the FSA break-up will likely stifle business, an actuarial consultant has said.

Elliot Varnell, a consulting actuary at Milliman, said at the Fitch Ratings Insurance Roadshow 2012 yesterday, that auto-enrolment has created an opening for the sector to sell life insurance to more people.

He said: "I think this is a huge opportunity for the life sector because we have got a certain demographic of people that we currently engage with. But we are now potentially expanding the pool of people which insurance companies will have access to and will be able to engage with.

"There are certainly opportunities for cross-selling there if the life insurance sector plays its cards right and has good interactions with that new demographic."

But Varnell expects the FSA's split into the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) will impact business going forward.

He said: "One of the things the life insurance sector is particularly concerned about is profits with things like principles and practices of financial management (PPFM), for example, which have a conduct element to them and a prudential element to them.

"I think a lot of the life insurers are going to be concerned that that is actually being joined up between the two regulators."

Varnell added that the FCA potentially having to "shoot first and ask questions later" could have a negative impact on product development.

He said: "That course of action could stifle innovation. If companies are thinking about creating new products or the ways in which insurance could add value for customers, it might not be the most attractive thing to do if they think Martin Wheatley [chief executive designate of the FCA] is going to shoot them in the head before they have actually really thought about it."

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