UK Insurance Regulation – A year in review

2005 has been characterised by flux and a steep learning curve, for both the Financial Services Authority (FSA) and firms; both traits are likely to continue in 2006. The regulatory burden on the insurance industry in the UK in 2005 was unprecedented. ICOB, ICAS, KFIs, TCF and more, have demanded strong measures and input from senior management throughout the year and although, under the circumstances, the industry as a whole has performed well, much more work will be needed to satisfy the regulator in 2006. However, the key issues affecting firms over the last twelve months indicate a change in culture within the industry and a more customer-focused approach, a move promoted and supported by FSA regulation.

Implementing ICOB

On January 14th 2005, the European Parliament’s Insurance Mediation Directive (IMD) came into effect and was implemented by the UK government in the form of the Insurance Code of Business rules (ICOB). The UK general insurance industry has had to deal with a mountain of new rules, costs and an eager supervisor since ICOB was implemented and the FSA has acknowledged a steep learning curve in its dealing with the industry. At the start of 2005, the Insurance sector in the UK was particularly substantial. There were over 10,000 authorised brokers whose primary activity was general insurance

and in December, the FSA announced that it had kept more than 600 unsuitable mortgage and general insurance firms out of the industry since the start of regulation.