Britain’s top regulator has been accused of backtracking on a promise to introduce “proportionate” red-tape on insurance brokers, after launching 10 in-dustry reviews in nine months.
Martin Wheatley made the pledge to a British Insurance Brokers Association (Biba) conference in May, just weeks after he had taken over as head of the newly-formed Financial Conduct Authority (FCA). Insurance brokers account for about one per cent of the British economy, but are furious that they have been subjected to swathes of regulation in the wake of the global meltdown, even though they are of little systemic risk to the financial system.
But rather than ease the burden on a sector that is full of small and medium-sized companies that struggle to absorb any additional costs to their day-to-day operations, they have instead been struck by this huge number of probes into their industry. These have included reviews into the insurance of motor legal expenses and mobile phones, while the FCA is also looking into payments between insurers and brokers that could lead to conflicts of interest, such as not finding customers the best available policies.
Steve White, the chief executive at Biba, told The Independent: “The issue is the cumulative effect. Individually, each review has merit, but our concern, as shared by our members, is that they are causing an obstruction to serving customers – with more reviews to follow.
“This certainly doesn’t feel proportionate, particularly given the low risks of the broking industry.”
The biggest risks associated with brokers are that they might give poor quality advice on the policies that clients should purchase and they could cause those customers to lose money. Neither of these are the type of seismic impacts that could be identified as potential causes of a financial crisis.
An industry source who attended the Biba conference added that “this is a war and the next battle that comes up we will be armed and ready to go”.
In his speech in May, Mr Wheatley said: “Very few markets in the financial sector have emerged with their reputation intact following the financial crisis. Our insurance markets, however, remain strong. It is my job, it is the FCA’s job, to make sure that is the case for many years to come.”