10 INTERVIEW
A Westminster wish-list
A change of government has led to the announcement of a new regulatory regime. Brokers’ Monthly spoke to
Barbara Bradshaw, chief executive of the Institute of Insurance Brokers, for her take on what it all means
BM: Once consultation for regulators to replace the Financial Services Authority gets underway what do you think insurers and brokers need to be doing to get the right messages across?
BB: A lot of political lobbying work needs to be done by the insurance industry. There has been a huge amount of attention directed towards the banks - arguably insurers are somehow seen as less important within the economy, but, they have largely kept out of trouble. It is vital that trade bodies representing both insurers and brokers explain they have not created the problems which the banks have been responsible for. We must have regulation which is more proportionate.
BM: The Institute of Insurance Brokers was responsible for running the administration for the Insurance Brokers’ Registration Council (IBRC), which closed in 2001. As an earlier regulatory model, do you think it had benefits?
BB: Most definitely - it was effective and so much cheaper. The problem was, it was not mandatory for brokers to join. What the IRBC showed was it is possible to have strong regulation at a fraction of the cost
of the FSA - in fact, it was arguably a more targeted and professional system. IBRC brokers had their accounts examined by an independent auditor. They had good quality professional indemnity insurance, and importantly, if there were disciplinary, problems, they were hauled up in front of their peers - and could be struck off. We moved to a situation where there was worse regulation and brokers had to deal with enormous rises in their regulatory costs - it is not untypical to find a broker who might have been paying say £1000 a year for being IBRC-registered to around £40, 000 under the FSA.
BM: What do think the main problems have been with the FSA?
BB: The FSA has undoubtedly improved in recent years, but what we have to be aware of is that it did not want to regulate brokers and certainly in early years, it did not fully understand our sector. I think being such a broad church did not work. Apart from the huge costs, the FSA has also created a big administration burden for brokers. Help with this is one of the main benefits of trade association membership. We have experts studying the vast amount of
Insurance Brokers’ Monthly July/August 2010
material put out by the FSA. Brokers do not have the time to read hundreds of pages of regulatory material or to work out how this affects their business - we are able to do this for them.
BM: What would you like to see in the form of the new Consumer Protection and Markets Authority (CMPA), which is expected to assume responsibility for the regulation of brokers?
BB: We want to see a narrower authority. Brokers are a straightforward sector to regulate. We also need clarification as to how the regulatory structure will operate for insurers - it has been announced that the Prudential Regulatory Authority, a subsidiary of the Bank of England, will oversee insurers, but the CPMA, will presumably deal with customer facing business, we need a clear outline of how this is going to work and overall, we want less complexity, not more. We also need to hear quickly as to who the key people will be - as yet, we don’t know if many are due to transfer over from the FSA, or indeed, if people will need to re-apply for their jobs. Although the term has fallen out favour, I think we should be subject to a lighter touch.
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