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FSA moves to principles-based GI regulation
24 March 2007
The Financial Services Authority (FSA) has announced it will move to a differentiated and more principles-based approach to general insurance (GI) regulation.
This will see a two-tier approach to personal protection and other GI, following an FSA review which showed consumers’ experiences and risk of detriment varied substantially across the various GI products.
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The FSA plans to remove most of the ICOB requirements for firms that go beyond minimum EU Directive requirements, while retaining the safeguards to protect consumers, including its Principles for Businesses.
However, the FSA found existing regulation of firms’ selling practices for protection products had an important role in reducing the risk of consumer detriment. It confirmed it intended to consider measures to improve selling practices of protection products, to reflect the risks posed to consumers.
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FSA chief executive, John Tiner, said: “There is now a strong case for moving to a differentiated regulatory regime, expressed in a more principles-based way, where the focus is on outcomes for consumers rather than processes within firms. Our insurance rules will be more risk-based and proportionate while continuing to meet our consumer protection objective.”
David Quick, managing director for CETA, said: “More work needs to be done to build consumer confidence around protection products.”
The FSA will publish a consultation paper on possible alterations in June 2007, with any rule changes likely to be made in December 2007.