This follows an interim report published by the FSA that demonstrates that consumer experiences and risk of detriment vary substantially across the various markets for general insurance (GI) products.
The review focused on how effectively general insurance markets are working for retail consumers. For general insurance products such as household or motor policies, the review found that markets work reasonably well in the interests of consumers, and that most consumers do not rely on disclosure documents from firms, which are prescribed by ICOB rules, when making purchasing decisions.
The FSA is therefore looking at removing most of the ICOB requirements for firms that go beyond minimum EU Directive requirements. The essential safeguards to protect consumers would be retained, including the Principles for Businesses.
By way of contrast, the review found that existing regulation of firms' selling practices has an important role in reducing the risk of consumer detriment for those buying personal protection products, such as payment protection and critical illness. These long-term products are usually second or tertiary purchases and consumers lack confidence and experience when buying them. Reflecting the greater risks with personal protection products and their sale, the FSA is also considering a small number of measures to improve selling practices of protection products and to enable customers to receive better information about the nature of the sale and the product.
FSA chief executive John Tiner said: "The work so far confirms our belief that the risk of consumer detriment varies according to the type of insurance product purchased. There is now a strong case for moving to a differentiated regulatory regime, expressed in a more principles-based way, where the focus is on outcomes for consumers rather than processes within firms. Our insurance rules will be more risk-based and proportionate while continuing to meet our consumer protection objective".
The FSA's ideas for rebalancing its general insurance regime are at an early stage and it will publish a Consultation Paper on possible rule changes in June 2007. Any rule changes are likely to be made in December 2007.
