The earth may not have moved for everyone but there were far reaching changes across the automotive industry, combined with confusion and uncertainty about what the regulations covered and what was required to comply.
Anyone now involved in selling, advising on, administration or claims handling of general insurance (GI) products needs to be authorized to do so by the FSA. GI day came and went, but was the industry ready and how is it coping seven months on?
“We have a positive view of the steps the automotive industry took to be ready for the regulations and we think it has done well with its level of compliancy,” says Andrew Honey, head of insurance department in the small firms division of the FSA.
“The issues that impacted on the industry tended to be questions of whether certain insurance and warranty products were in fact a contract of insurance and, therefore, subject to regulation. It was also difficult for some businesses to get timely information, which is something we are now addressing.”
#AM_ART_SPLIT# As with any new regulation, there will always be a tough transitional period when businesses adapt. The FSA has attempted to have as much dialogue as possible with different sectors of the industry and the main trade bodies, but realizes that anything that means more administration is unlikely to prove popular.
“We recognize that for secondary intermediaries, such as motor retailers, selling insurance isn’t the main business and there is an issue in having to deal with a larger amount of paperwork,” says Honey.
“What we need to do is ensure that they aren’t confused and are not providing information to customers unnecessarily. It is their job to help the customer, not merely give them wads of paper.” The FSA says it is still early days and that assessing the impact and understanding of the regulations will take time, but it claims it wants to avoid a heavy-handed approach with those who are falling foul.
“There are areas where we think dealers aren’t getting it right. Our aim in the first 12 months is to raise standards and educate dealers. To this end it’s up to us to provide useful communications that only include the important messages.”
#AM_ART_SPLIT# But it’s not just the initial impact that the FSA is concerned about. When businesses signed up to become authorized in January, they also agreed to ongoing compliancy and this is paramount if the regulations are going to continue to be effective. Once 12 months have passed, the FSA aims to provide some feedback on the areas it has identified as needing more attention. This will be part of an overall strategy of educating businesses on good practice and helping them to continue to comply.
“Our aim is to put things into simple English and answer the most frequently asked questions. We are also in the process of simplifying our handbook with the aim of giving businesses all the relevant information they need to remain compliant,” says Honey.
It’s backing this up with action, too.
Recognizing that in the automotive retail industry there is a significant number of businesses new to any form of insurance-based regulation, the FSA has recently embarked on a series of monthly roadshows across the UK.
These allow businesses to put questions directly to the experts at the FSA and they can also obtain information and explanations on the regulations and compliancy. Having already visited Newcastle, Glasgow and Edinburgh, the next ports of call are Reading, Chester, Brighton and London, with more planned for 2006.
#AM_ART_SPLIT# FSA promises to simplify rules and guidance
The Financial Services Authority is to simplify its handbook and remove unnecessary rules and guidance as part of a drive to achieve better regulation for businesses.
The review of the handbook will focus on eliminating or changing requirements that are more restrictive than necessary to achieve the FSA’s objectives, or that do not deliver benefits to justify their costs.
It will also address requirements that do not fit in with the FSA’s focus on senior management responsibility. “We are determined to be more rigorous about the costs and burdens that regulation imposes on firms,” says Callum McCarthy, chairman of the FSA.
“We are simplifying our handbook requirements and the way we express them, which will help all firms but particularly smaller ones who do not have access to expert advice.”
The FSA has watched the implementation of the regulations closely and has listened to the problems and issues that have arisen. It’s now aiming to put in place measures to make the whole process easier.
“We have major initiatives in hand to make us an easier organization to do business with, such as firms online, integrated regulatory reporting and the shorter application packs, which will reduce the time and effort firms need to spend dealing with us,” adds McCarthy.
The FSA is proposing to streamline and cut back the Approved Persons regime, which requires individuals within regulated businesses to have approval to carry out specific controlled functions (CFs). There are currently 29 functions and some of these will be removed or merged together. The authority, in partnership with the Financial Services Practitioner Panel, is also conducting a survey to establish and measure the real costs of regulation.
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