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The UK’s top financial regulator is considering rolling back rules governing the sale of insurance to big businesses, as it seeks ways to boost the competitiveness of London’s key capital markets.
The Financial Conduct Authority, which regulates insurers and other financial companies, on Monday published a discussion paper on simplifying the rules in the commercial insurance sector, saying the changes could “significantly reduce the time needed to take on new customers, or renew their contracts”.
It also announced a review of its wider rule book governing financial groups, calling on the industry to identify rules that overlap with its new consumer duty regime, which requires companies to create good outcomes for their customers.
FCA chief executive Nikhil Rathi said he wanted to “seize the opportunity . . . to streamline our rule book, lowering costs for businesses and supporting the competitiveness and growth of the economy”.
Executives in the UK commercial insurance sector, which takes in about £95bn in annual premiums, have lobbied for years for changes to rules that they say treat too many big corporate customers the same as a retail customer with little knowledge of insurance.
The FCA discussion paper suggests changes to how customers are categorised that could reduce the compliance burden involved in serving large, sophisticated corporate buyers of insurance without reducing protections for individuals and smaller businesses.
“The discussion we’re starting today will help to ensure our rules continue to support a globally competitive UK commercial insurance market, while providing the necessary protections for [small and medium-sized businesses],” said the FCA’s director of insurance Matt Brewis.
One option is to increase the categories of insurance that can have lighter rules for big commercial buyers: in some areas such as private medical insurance, there is no differentiation between retail and corporate customers.
In the subscription-based market of London specialist insurance, where a number of insurers underwrite a single policy, another proposal is to give the responsibility for product governance to the lead insurer, who takes the first chunk of risk under the contract.
Caroline Wagstaff, chief executive of the London Market Group, a trade body, said the paper was a “serious attempt to deal with the issue of proportionality that we have been asking for”.
The paper, she added, “contains some practical options that we think could certainly help reduce cost and complexity, and their acknowledgment of how this helps growth and competitiveness is also very welcome”. The British Insurance Brokers’ Association said the paper, which invites responses by September, was a “positive first step”.
The FCA had “finally recognised the difficulties in attempting to apply rules written for the mass market consumer business to the commercial end of the market”, said Sarah Brook, a partner at law firm CMS. These have created an “undue compliance burden” for companies, she added.
The FCA also published on Monday a report into its new secondary objective to promote UK competitiveness and economic growth. This found 98 per cent of authorisation requests, for new firms or approving a new senior manager, for example, were being assessed within statutory deadlines, after widespread criticism of the pace of signoffs.