Insurance buyers must raise their game

This issue of IR&A covered John Tiner’s words of advice to the commercial buyers of insurance in the UK (see page 1). In the same speech, he also spoke about the regulator’s challenge in balancing regulation of the wholesale insurance market and the buyers’ power in influencing change in the insurance industry. In this extract from that speech, Mr Tiner defines the different roles of the regulator and the insurance buyer in reaching the shared goal of a sound but competitive insurance market.

The FSA’s philosophy is that the best results for any market are achieved for all participants through the efficient working of the market, and not by regulation. When markets do not work efficiently, the first priority should be to focus on improving efficiency, best of all by relying on market solutions, rather than go into a frenzied round of rule-making. Regulation should always only occur when there is both an identified inefficiency in the market – the market failure as the academics would call it – and when regulation would deliver benefits that would clearly outweigh the costs. A ‘no brainer’ you may say.