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FSA Regulation - A Summary of Insurance DistributionPublished by: Datamonitor Published: May. 6, 2005 - 45 Pages Table of ContentsTABLE OF CONTENTS CHAPTER 1 EXECUTIVE SUMMARY 3 Introduction 3 Regulatory context 3 Over 40,000 firms are now regulated 3 Regulation will cost the insurance industry over £160 million per year 3 Impact of regulation 4 Insurers are adapting to new processes 4 The impact of regulation will vary by product 4 Consumers have not been affected by change to their insurance-buying experience 4 There has been modest contraction of primary intermediaries 4 The FSA has identified three ‘hotspot’ sectors 5 Banks and building societies are deciding on a course of action 5 Conclusions 5 Regulation will impact all stakeholders in the insurance market 5 The scope of FSA regulation will alter 5 There will be changes to insurers’ route to market 5 CHAPTER 2 INTRODUCTION 13 What is this report about? 13 Who is the target reader? 13 How to use this report 14 CHAPTER 3 REGULATORY CONTEXT 15 Introduction 15 Summary of regulation 15 The FSA has taken over from GISC… 15 …and is the regulator for all insurance providers 15 Number and type of registrations 15 Cost of regulation 17 Regulation will cost the insurance industry over £160 million per year 17 Brokers will face considerable costs, but these may be less than anticipated 18 The cost of regulation will be passed on to consumers 19 CHAPTER 4 IMPACT OF REGULATION 20 Introduction 20 Impact on insurers 20 New processes have been introduced 20 Insurers are abiding by Insurance: Conduct of Business rules 20 Agency arrangements have been pressured 21 Impact on product distribution 22 The impact of regulation will vary by product 22 Creditor insurance is likely to come under increasing scrutiny 23 There are concerns that creditor insurance will be adversely affected by FSA regulation. 23 Travel insurance is outside the scope of regulation 24 Regulation could boost health insurance sales… 25 …and commercial lines insurance sales may also grow 26 New regulation from Europe concerning block transfer rules may prove unworkable 26 Impact on consumers 27 Consumers have not been affected by change to their insurance-buying experience 27 The Financial Ombudsman Service is tasked with dispute resolution 29 The Financial Services Compensation Scheme is strengthening consumer rights 32 Impact on distributors 33 There has been modest contraction of primary intermediaries 33 The contraction of secondary intermediaries is a bigger cause for concern 34 Interim authorization has given some intermediaries a second chance 34 Insurance networks will continue to develop 35 There has so far been no evidence of unauthorized practice 35 CHAPTER 5 CONCLUSIONS 37 Introduction 37 Regulatory impact 37 Customer service will improve post-FSA 37 Business practices will come under heightened scrutiny 38 FSA regulation will add to insurers’ costs 38 Some secondary intermediaries will pull out of providing insurance 38 Travel insurance and extended warranty should become regulated 40 Datamonitor’s view 40 Regulation has brought about minimal change 40 CHAPTER 6 APPENDIX 42 Definitions 42 Research methodology 42 NERA research 42 Further readings 43 Current titles 43 Future titles 43 Relevant links 43 Datamonitor’s custom research capabilities 43 SPP writing team 45 LIST OF TABLES Table 1: Number of firms authorized to carry on general insurance business, 14 January 2005 16 Table 2: Estimated compliance costs of FSA proposals 17 Table 3: General insurance complaints to the Financial Ombudsman Service, 2003-4 32 LIST OF FIGURES Figure 1: Motor claims were most commonly submitted to the FOS in 2003/4 31 Figure 2: Datamonitor’s core consulting capabilities 44 AbstractIntroductionThis report examines the distribution of general insurance following the start of FSA regulation in January 2005. The number of registrations is examined in order to provide a picture of the number of distributors present in this market and the fallout that occurred on the back of regulation. How these changes will affect the market in terms of routes to market is also investigated. Scope The insurance market is put in context in terms of the number of regulation applications to the FSA and the number of authorizations granted The brief considers the impact of regulation on insurance brokers and secondary intermediaries such as motor traders and property agents The brief suggests the lasting impact of FSA regulation and what changes it will cause to the general insurance market in the near future Insight from industry executives provides a balanced assessment of the effect of regulation on the insurance buying and insurance selling experience Highlights By 14 January 2005 over 18,000 firms had received direct authorization and a further 22,000 firms had been granted appointed representative status. The ongoing cost of regulation to the insurance industry is expected to be over £160 million per year. Few insurers have noted a significant reduction in broker numbers either in the lead-up to or subsequent to FSA regulation. However, the FSA has identified three 'hotspot' sectors that were delaying their applications for authorization and may cease providing general insurance products. Regulation is likely to have an unequal effect on various insurance products, potentially affecting some product lines more than others. There are concerns over the provision of free, add-on insurance products although for niche commercial products the likelihood of successful sales may increase. Reasons to Purchase Gain insight into the number of regulated intermediaries and the potential distribution routes under the new regulatory regime Understand the product areas that regulation will most affect and the types of intermediary that may have to curtail insurance sales Assess the overall impact on your business and how the FSA may revise regulations to create a more efficient insurance market Get Full Details About This Report >> |
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