Interim report confusion

Ian Ritchie, Managing director, RW Associates

The Financial Services Authority has issued an interim report with further information to follow in June. This suggests that disclosure documentation requirements, particularly in respect of motor and household insurances, may well be reduced. Their report finds that in many cases, people do not read all of the documentation, and buy mainly on price. No doubt this will not come as earth shattering news to many brokers.

It may be that the outcome is that the documentation requirements will be reduced. However, the underlying requirement to have procedures in place to be able to demonstrate to the regulator why a particular recommendation was made, will not go away.

In essence, what is being implied is that, thus far, regulation has worked in terms of consumer protection. However, the customers are not necessarily recognising the value of the work that brokers have put in. So, continue to put the work in but maybe not tell the customers quite so much, looks to be the outcome. If anyone thinks that has been a bit of a waste of time, do not worry, the FSA has a descriptive phrase for it. It is called a 'sunk benefit' (See section 7.6 of the report). The review will consider whether there has been superequivalent (See section 7.3 of the report) rules to the requirements of the IMD.

No doubt readers will wish to acquaint themselves with the FSA's findings. For those having difficulty in sleeping, the link is http://www.fsa.gov.uk/pubs/other/ICOB_review.pdf. Enjoy the read.