Source: Insurance Age | 02 Feb 2016
Categories: Broker, Regulation
Tags: government | FCA | Biba
Former broker Craig Tracey MP says FCA regulation of the insurance industry is not proportionate.
In a backbench business debate in Parliament on 1 February, MPs raised concerns about regulation.
Craig Tracey MP, who previously owned Dunelm Insurance Brokers, talked about the Financial Conduct Authority’s (FCA) failure to work in partnership with the insurance profession to understand it and create an effective model targeting the key concerns.
He further noted that research from the British Insurance Brokers’ Association (Biba) in 2013 had found that “the UK broking market is the most expensive on the planet in terms of the direct cost of regulation”.
Commenting on the FCA’s recent decision to increase the minimum fee for the A19 general insurance intermediary fee block by 8.4%, he added: “The largest UK brokers privately indicate that they pay ‘comfortably’ over £1m a year in fees to the regulator.
“Worryingly, in its response to Biba following the rise, the FCA indicated that, if the increase had been in line with the annual funding requirement, the rise could have been even greater – 46% over four years.”
According to Tracey, the FCA recently revealed that 59% of the fee block, or £16.4m, is used for supervision.
He further pointed out that 75% of Biba members are small firms and would not be subject to regular visits by the watchdog.
“Therefore, the proportion of the fee block that is used for supervision appears distorted and suggests that UK insurance brokers are paying for supervision of other, non-insurance broker entities,” Tracey said.
The Conservative MP for North Warwickshire also raised the concern that many smaller firms had disappeared since regulation was introduced.
Tracey said: “In my final years as a broker, 80% of my time was spent working on compliance rather than being productive in my business.
“That was a small brokerage providing a valuable high street presence to people who needed access to somebody they knew and trusted.”
He added: “A clear case can be made that firms that abide by the rules should not be the ones that pay for the misbehaviours and increased regulation caused by other firms.”
Tracey mentioned that the Financial Services Compensation Scheme was another area that needed reviewing.
The debate started with the Connaught Income Fund and also included comments on the redress scheme and the Royal Bank of Scotland’s involvement in the scheme.
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