INTERVIEW 11
BM: Who will you be lobbying in this respect? BB: Treasury Secretary Mark Hoban is the main man. We’ve already had a lot of dealings with him, including meeting him at Westminster. Interestingly, in a previous career he was an auditor - and audited brokers, so, he does have understanding of what we do. Through our president, the former MP John Greenway, we’re going to remain in close contact with Mark and will be working with an all party group on financial services. We also want to make sure that we get strong messages out to Europe - and that in the UK, we stop gold plating, which simply adds on more cost.
BM: What are your thoughts on the increased levy brokers are required to pay to the Financial Services Compensation Scheme (FSCS)?
BB: We have been arguing with the FSCS from Day 1 on this issue - we are totally opposed to fact that some £61 million of a £148 million levy is linked to payment protection insurance. One member I spoke to recently said his fees payable to FSCS has risen by an astronomical amount from £2,000 to £19,000. It is unfair in the extreme and making life extremely difficult for many brokers - and let us not forget that the vast majority never sold PPI. We will keep lobbying on this crucial issue. Our view is that there should be a product levy, which would be a small amount on each product sold, but would raise substantial sums to provide consumer protection should it be required.
BM: Are you concerned by the rise in insurance premium tax (IPT)?
BB: On the standard rate, we are only seeing a rise of 1 per cent - from 5 per cent to 6 per cent - frankly, I think we have got off lightly. No one wants to see any increase in tax, but it is clear the UK is in an awful financial mess and everyone is going to feel some pain. And, I can’t see that this small rise is going to stop people buying cover. On the higher rate, there is a 2.5 per cent rise from 17.5 per cent to 20 per cent, which will apply to travel - again, it may not be welcome, but it could have been far worse.
Regulatory changes - what’s on the agenda?
In a speech at London’s Mansion House, on 16 June, Chancellor George Osborne announced a series of substantial reforms to the UK regulatory system, indicating that the Financial Services Authority (FSA) will “cease to exist in its current form”.
The new regulatory system will see the dismantling of the FSA and the creation of three new regulatory bodies. These are:
The Prudential Regulation Authority (PRA), a subsidiary of the Bank of England which will be responsible for the macro-prudential regulation of sectors including deposit-takers, insurers and investment banks
The Consumer Protection and Markets Agency (CPMA) which will take on the FSA’s responsibility for consumer protection and conduct regulation, regulating all firms, both retail and wholesale, including those regulated prudentially by the PRA
A single agency to tackle serious economic crime.
The government also intends to legislate to create a new Financial Policy Committee (FPC) in the Bank of England which will be responsible for maintaining financial stability.
Hector Sants, the current chief executive officer of the FSA, will remain at the FSA to oversee the transitions before becoming the CEO of the PRA, supported by Andrew Bailey from the Bank of England.
In a statement to the House of Commons on June 17, 2010, Financial Secretary Mark Hoban MP announced a timetable for the reforms. The government will begin by legislating to create the FPC. This will be followed by the creation of the PRA and, finally, the CPMA.
An interim FPC will be established by
Autumn 2010, in advance of legislation, and the passage of all necessary primary legislation will take place within two years. A “full and comprehensive” consultation process will begin immediately in relation to the PRA, CMPA and economic crime agency and the government has pledged to publish a detailed policy document for consultation before the summer recess.
On the CMPA - which will have primary responsibility for regulating brokers - Mr Hoban said: “The CPMA will regulate the conduct of all firms, both retail and wholesale – including those regulated prudentially by the Prudential Regulation Authority – and will take a proactive role as a strong consumer champion.
“It will have a strong mandate for ensuring that financial services and markets are transparent in their operation, so that everyone – from someone buying car insurance to a trader at a large bank – can have confidence in their dealings, and know that they will get the protection they need if something goes wrong. The CPMA will regulate the conduct of every financial service business, whether they trade on the high street or trade in high finance. We need to ensure that this body has a tougher, more proactive approach to regulating conduct and its primary objective will be promoting confidence in financial services and markets.
“The CPMA will maintain the FSA’s existing responsibility for the FOS and oversee the newly created CFEB, which will play a key role in improving financial capability. The CPMA will also have responsibility for the FSCS, but given the important role it plays in crises, it will work closely with the Financial Policy Committee and PRA.”
The government will publish a detailed policy document before the summer recess before a full consultation process with the necessary primary legislation set to be passed within two years.
July/August 2010 Insurance Brokers’ Monthly
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