At yesterday's annual meeting it said it expected the Personal Investment Authority - due to be formally recognised today as the self- regulatory body for retail financial services - to be operational by July. Yet its call for statutory regulation echoes outspoken critics of the PIA, such as Prudential.
The ABI's report said: 'It is unlikely that the establishment of the PIA will signify the end of the debate on the regulation of financial services. The recent debate itself has been sufficient to cast doubt on the validity of a self- regulatory regime in the light of changing market circumstances since 1985.'
A submission to the Treasury Select Committee said: 'The ABI as a whole considers that there should be a move over time towards a more statutory system with the practitioner involvement coming through consultation with the industry, rather than involvement in the governing bodies of the regulatory organisations.'
Its paper says the existing system is too complex and has conflicts of interest. It recommends a regulatory system similar to that for banks, saying changes in the Financial Services Act would not be necessary to introduce direct regulation.
Allan Bridgewater, chairman, said the issue of poor advice on pensions transfer, raised last year, presented the industry with a challenge. The ABI was committed to compensating anyone who had suffered harm through bad advice. The likely cost was not yet known but would be less than estimates of pounds 1bn.
Mr Bridgewater said: 'It is certainly not in the interests of policyholders or the insurance industry for the personal pension market to develop based on bad selling or over- selling of inappropriate products. Where this has happened in the past the industry must make sure it does not happen in the future.'
The UK insurance industry made a profit equal to 5 per cent of premium income in 1993, after three years of losses. The industry was concerned about the drain on its income from taxes and fraudulent claims.Reuse content