“In this world nothing can be said to be certain, except death and taxes.” said Benjamin Franklin. I think I might add another thing to the list – increasing regulation.
The Financial Conduct Authority got its teeth stuck into the mortgage and general insurance markets last year, introducing reforms to the former by way of the Mortgage Market Review rules in April and publishing a stream of findings from its many thematic reviews of the latter including add-ons and price comparison websites.
And it demonstrated that its bark was backed up by a serious bite, imposing some tough fines and bans on companies and individuals alike who flouted regulations.
But if anyone was thinking that the FCA might take a breather this year, think again. The regulator’s head of general insurance and protection made it clear at a recent industry event that it still wants to do more to whip the general insurance industry in particular into shape.
So what cards is the regulator looking to deal in 2015?
One main area of focus is likely to be the value of insurance. Whether it is down to the price comparison websites or the economy or the fact that insurance is unlikely to top the shopping list, consumers are heavily price-driven when it comes to buying a policy. However as we all know, the cheapest isn’t always the best at meeting the consumer’s individual needs.
The FCA is concerned that consumers are under-insured and, in its words, unconsciously self-insuring. One of its aims is going to be to try and promote knowledgeable, confident and informed buying of insurance and better buying behaviour.
Now while we don’t know what this will actually mean, in principle it looks good news for intermediaries. If the FCA is going to require providers of general insurance to deliver clearer information at the point of sale, that’s going to make the online buying process potentially more onerous and that doesn’t play into the hands of the aggregators. As I’ve said many times over recent years, intermediaries are best placed to drill down into a consumer’s individual circumstances, needs and budget and then source the most appropriate insurance options. And that should mean that consumer gets the cover they need and is neither under nor over insured.
When it comes to regulation in the mortgage market, it’s not necessarily the FCA that will be dealing the cards. The government is keen to give it new powers to control residential mortgage lending to reduce the risk of the market overheating, whilst the BoE has made a request to regulate lending to landlords which is currently under consideration.
If the Old Lady of Threadneedle Street does get greater regulatory powers, this could well impact the business of mortgage brokers. Whether this is a real threat or not remains to be seen. It is unlikely however that any new laws on the subject would be passed before the general election in May – and the new government may choose not to push the current one’s plans through.
As ever, both the mortgage and general insurance industries will have to play a waiting game. Let’s just keep our fingers crossed that whatever cards the regulator deals, it won’t be holding any jokers up its sleeve.
Kevin Paterson is managing director of Source Insurance