The aim of the review is to assess how regulation is affecting the GI market through the insurance conduct of business rules (ICOB) and hopes to assist the regulator to move towards principles-based regulation.
It will also look at the potential risks to consumers in selling cover such as payment protection insurance (PPI) and critical illness policies, areas which have come under fire in recent months.
Dan Waters, director of retail policy at the FSA, said: "Effectiveness reviews are part of the FSA's approach seeking to ensure that its interventions in the market make a real and beneficial difference in practice. The GI effectiveness review presents a good and timely opportunity to look at ICOB in fine detail from the viewpoint of restricting prescription to the point where it is only demonstrably necessary to meet our consumer protection objective."
The review will cover if ICOB protects consumers from the sale of fraudulent and ineffective PPI policies and will be published in the first quarter of 2007.
GI firms have welcomed the review and are hopeful that it can help sort out some of the negative practices in the industry.
Simon Burgess, managing director at British Insurance, said: “It is a very positive development. It is about time the FSA showed its teeth and demonstrated that it’s a regulator as there are practices going on in the industry which need to be sorted out.
“Everyone in the past who tried to sort these problems out failed and the FSA is the only organisation with the wherewithal to deal with them.”
Tim Eacott, compliance director at Select & Protect, commented: “It’s always right to review what you are doing. We’re on board with the ICOB rules so there are no arguments over the fundamentals. However, there is scope to look at some of the details, for example the demands and needs statement.”
