The UK's Financial Services Authority (FSA) has put on hold its work to develop rules to bring about contract certainty in the insurance market.
Speaking at the FSA’s insurance sector conference, John Tiner, chief executive of the FSA, acknowledged the progress made by the insurance market in meeting the FSA’s challenge to achieve contract certainty. The challenge to end the ‘deal now, detail later’ approach was issued to the market in December 2004.
The FSA gave the market two years to ensure that insurance contract terms are agreed at the time the policies commence. Contract certainty will lead to greater certainty for buyers about what they have bought and for insurers about the risks they are covering, whilst also reducing risks for brokers.
Throughout this period, the FSA has been clear that if the market fails to develop its own solution, it will have to intervene with new rules and requirements. In line with its better regulation agenda, the FSA’s preference has always been for the market to find its own solution without the need for regulatory intervention.
Since December 2004 the FSA has been monitoring progress by working with groups representing the market to achieve the goal of contract certainty. Today’s announcement follows the receipt of data from the market showing that it had exceeded its own targets for achieving improvements in contract certainty at the end of 2005.
To demonstrate our good faith in the market’s ability to reach its goal, we will not be pressing ahead with our work on the contingency plan of regulatory intervention. We are putting it on the back-burner, although we are not taking it off the stove altogether, Mr Tiner said.
I would strongly caution against complacency in these next few crucial months; the market must continue to stretch itself to guarantee that the challenge is met by the end of the year….On our part, we will continue to assess progress beginning in the next quarter, not least to see how the market has performed against the challenging January 1 renewal period. We will continue to work with the market in our role as over-seer and facilitator, and will not hesitate in consulting on new rules should progress falter.