Marking a significant step towards more principles-based regulations, the UK Financial Services Authority has published a consultation paper proposing to change the rules that firms need to follow when conducting general insurance business. A differentiated approach to insurance conduct of business regulation is at the heart of the proposals.
For general insurance business, such as household, motor or pet policies, this means moving to principles and high-level rules, except where detailed provisions are required by EU directives. While this will mean more flexibility for firms, the Financial Services Authority (FSA) will require the same standards of conduct and essential consumer safeguards to remain.
For protection products, the FSA is proposing a small number of additional rules carefully targeted to improve selling practices in areas where consumers are losing out. While some measurements will only apply to specific products, other rules will apply to all protection products.
Following the consultation, the new general insurance regime is likely to come into effect in January 2008, with firms being allowed a transitional period for implementation.
Dan Waters, FSA director of retail policy, said: Following our recent radical overhaul of the investment conduct of business rules, today’s announcement is another big step towards more principles-based regulation. All the evidence suggests that consumer detriment varies a lot according to the type of insurance product involved. And it is right we should now move to a differentiated and principles-based regime for general insurance where the focus is on outcomes for consumers rather than processes within firms.