Hoping for a lighter regulatory touch

Our new Liberal-Conservative coalition government has certainly hit the ground running.

Media attention may have focused on the grievous state of the public finances – and the necessary measures now proposed for improving them – but numerous other important changes are on the way, too. Some could have a lasting effect on the insurance industry.

The keynote of the coalition agreement is ‘freedom, fairness and responsibility’ – a classic liberal conservative slogan if ever I heard one – and those themes run clearly and strongly through policy.

The desire to see more decisions taken locally – to create a ‘Big Society’ in place of an overweening state – has implications for every one of us. It will create both challenges and opportunities.

Ministers plan to split the functions of the FSA between two bodies. The Bank of England will take charge of macro-prudential regulation, with a new Financial Policy Committee and a new Prudential Regulation Authority (PRA) under its aegis.

A new Consumer Protection and Markets Authority will regulate the conduct of all firms, both retail and wholesale, including those prudentially regulated by the PRA.

Although what matters ultimately is policies (and their enforcement) rather than structures, the changes are likely to make a huge difference for insurance. If the march towards professionalism continues, then I hope the new regime will be sufficiently flexible to acknowledge that progress. As more of the industry embraces professional standards and values, truly proportionate regulation should grow lighter.

The timescale for the reforms is two years, so there will be lengthy consultation before the enabling legislation appears.

We must all take full advantage of that, ensuring the distinctive voice of insurance is heard and our industry is not burdened unfairly as a consequence of some regrettable events within the banking sector.

Financial secretary Mark Hoban is already establishing himself as one of the stars of the new government. He is modest, thoughtful and diligent, and he knows the difference between the regulation of insurers and of banks.

Most strikingly of all, Hoban possesses a characteristic that can sometimes seem lacking in politicians – a genuine willingness to listen and learn.

Another matter of great interest is the report on health and safety from my former ministerial colleague Lord Young. This was commissioned by prime minister David Cameron back in December, and I understand it is now imminent. David Young radiates common sense and he understands business.

He has also spoken out in favour of Lord Justice Jackson’s conclusion on costs. I look forward to his report.

Rather than seeking to cherry-pick the most favourable recommendations in the Jackson Report, the industry has embraced the idea of implementing these proposals in their entirety. What an enlightened and positive decision.

Lord McNally, the new Justice Minister, has told me ministers are “urgently assessing” and intend to come forward with recommendations “as quickly as possible”.

David Cameron and deputy prime minister Nick Clegg have agreed a coalition for a full five-year term, and in no department do I find any sense of “them and us”. Coalitions are the norm elsewhere, and I believe one can work well here too, in the public interest.

I know the old Chinese saying “may you live in interesting times” was a curse, not a blessing, but these are interesting times indeed, and I believe we can indulge in a little optimism.

Lord Hunt of Wirral is a partner and chairman of the financial services group at national commercial law firm Beachcroft. IT