Barbara's blog: Regulators, know your limits!

Today, for my first ever official blog, I want to talk about the need for a crash course in insurance broking for the regulators and then about the subject of diversity (and I don’t mean the dance troupe seen on Britain’s Got Talent, although some may find that more interesting than the insurance angle!) and then, inevitably, the farce of payment protection issuance (PPI) mis-selling – you would expect me to take a pop at that, wouldn’t you?

Naturally, I wish Martin Wheatley a good journey to the UK from Hong Kong to take up his position at the Consumer Markets and Protection Authority, or, as I now understand it to be called, the Financial Conduct Authority – certainly less of a mouthful!

I do hope Mr Wheatley and his team will take time out to learn the vital nature of general insurance broking in the UK – not just on the mega scale of invisible exports, but what it means to the public (personal lines and commercial lines clients) at large. It is still a seriously significant sector of the domestic insurance market despite the disproportionate burden it bears for the "sins of others" trying, inexorably, to pull it down.

The trouble with rule-makers

I am not alone, by any means, in being concerned that regulators and civil servants lack commercial understanding of our market. They all have basic experience of buying and claiming on insurance at some time in their life, but that does not qualify them to change the face of the insurance industry. To use an analogy, would you ask your petrol-head friend to service your Ferrari or even your Ford? And, remember, I have frequently been called a Formula 1 junkie!

Last year I walked around with a wry, bemused smile on my face as the IPT/fees battle was successful. Why bemused? It was another example of rules being created by those that had no knowledge of the industry or profession they were seeking to change. I do hope that there was a lesson learned and our new regulator will see that there is always a corridor to willing assistance from those that do understand significant market segments such as the domestic insurance broking market. If only the powers-that-be would swallow their pride to ask, it could save them a lot of egg on the face, so to speak.

Regulators should spend their time on what needs to be regulated rather than spending a great deal of time and money (reflected in levies and fees) to resolve issues that are of marginal responsibility to the sector. I refer, of course, to PPI issues – never the big product or service offered by insurance brokers. How many times does this point need to be made? A challenge for Mr Wheatley to take up the cudgels on behalf of the insurance broking sector?

Good news, bad news

Oops, fanfare of music, I nearly forgot diversity. The recent 70-page FSA discussion paper, Product Intervention, suggests that our regulator will look at the whole product life-cycle of every product to anticipate (and presumably stop, control, change or manipulate) any that are seen as potentially detrimental to the consumer. The good news is that by studying every product the regulator will start to understand the ramifications of insurance distribution and delivery. The bad news:

• They’ll need to expand their numbers and we all know what that means!
• Innovative product creation may be slowed down considerably – in some markets giving away advantages to foreign competitors particularly in off-shore markets.

Having got that lot out of my system, unfortunately it won’t be difficult to think of a subject for my next blog!

Barbara Bradshaw is chief executive of the Institute of Insurance Brokers (IIB).