109/02
21 October 2002
GENERAL INSURANCE REGULATION - CONSULTATION STARTS
Proposals to regulate the sale of general insurance were announced today by Ruth Kelly, Financial Secretary to the Treasury. These take account of the EU’s Insurance Mediation Directive that was adopted by the European Parliament on 30 September 2002.
Commenting on the publication of Regulating Insurance Mediation Ruth Kelly said:
“The proposals will enhance consumer protection in an important area of people’s lives. Everyone takes out a general insurance product of some kind or another, whether it is buildings and contents insurance when buying a new home, payment protection when taking out loans, or indeed motor insurance.
“Consumers will benefit through increased protection and better quality advice. Industry will benefit through the simplifying and streamlining of regulation. In the future, intermediaries selling general insurance, mortgages or pensions will all come under the FSA as single regulator. There will be new opportunities for brokers as they will be able to compete for business in other EU countries”
As part of this consultation the Government will be considering whether to regulate travel insurance sold as part of a package with holidays.
Ruth Kelly added:
“The Treasury will be consulting about whether to regulate travel insurance sold as part of a package. The Government needs to weigh fairly the competition issues between those intermediaries that sell travel insurance direct and travel agents that sell insurance alongside a holiday. It is important that the government gets the right answer in a very important market which is why we are seeking evidence and views as a part of this consultation process.”
Ruth Kelly also paid tribute to the work of the General Insurance Standards Council (GISC), the general insurance regulator:
“I am grateful for GISC’s ongoing work in raising standards, enhancing consumer protection and raising the reputation of the industry. I should also like to pay tribute to GISC staff for all their efforts. It is important that GISC remains in place and is effective until statutory regulation comes into force to ensure a smooth transition. This progression will be aided by the FSA giving due credit to firms in ‘good standing’ with GISC and other comparable organisations.”
Notes to editors
1. Today’s consultation was announced to parliament at 3:30pm today in answer to a Parliamentary Question.
2. Ruth Kelly announced the decision to regulate general insurance as well as mortgage advice on 12 December 2001. (HMT PN 140/01)
3. The Insurance Mediation Directive is available from the EU website
4. The activities to be regulated are:
- introducing, proposing or carrying out other work preparatory to the conclusion of contracts of insurance;
- assisting in the administration and performance of such contracts, in particular in the event of a claim; and
- concluding contracts of insurance.
5. The Directive requires the regulation of mediation activities in relation to all contracts of insurance. However, it provides certain exemptions for insurance sold as part of a package, including travel insurance sold with a holiday and extended warranties that are general insurance.
6. The consultation on travel insurance sold with a holiday will consider three options:
- No statutory regulation of sales of travel insurance sold as part of a package;
- FSA regulation to cover these sales in the same way as stand alone sales of travel insurance; or
- Industry specific regulation, requiring sellers of these products to be authorised by the FSA unless they are subject to an ABTA code which would be certified by the FSA. Sellers who were subject to the ABTA code but who also carried on other FSMA regulated activity, including selling any insurance other than packaged travel insurance, would be subject to FSA authorisation in relation to all of their regulated activities (including the activities to which the ABTA code applied).
7. The Government has decided to defer a decision on whether extended warranties should be regulated by the FSA pending the outcome of the Competition Commission enquiry announced in July 2002.
8. Responses to the consultation, to be received by 31 January 2003 should be sent to:
Mark Baldwin
HM Treasury
1 Horse Guards Road
London
SW1A 2HQ
Fax 020 2270 4694
E-mail Mark Baldwin
9. The consultation document Regulating Insurance Mediation can be found on this site. Further enquiries should be directed to the Treasury’s press office, tel. 020 7270 4420