Last month, Victor Millwell published an article on the British Insurance Brokers Association’s (Biba) 2016 manifesto which outlined their areas of focus for the year. One of the most prominent points in Biba’s 2016 manifesto was “Regulation” as the association continues to work with the FCA to find a balance within the industry.
Now, Craig Tracey, Conservative MP for North Warwickshire, who previously worked as an insurance broker for over 20 years, has spoken out about the amount of regulation put in place by the FCA and how it could have a negative effect on smaller insurance brokers.
In an interview with Insurance Age, Mr Tracey claimed that unless something is done to stop the FCA creating an increasing amount of regulations for the insurance industry, smaller brokers may soon be pushed out of the market. He claimed that these types of brokers will have to spend so much time and resource on keeping up with the FCA’s regulations that they will no longer be able to properly run their businesses.
One negative consequence of smaller brokers leaving the industry is that consumers may be more likely to start using aggregator sites. “Then they’re not getting advice and they become their own experts,” said Mr Tracey, “I think that is a dangerous issue, it’s similar to the pensions freedoms that there are now. Access to financial advice has never been more difficult to get and you really do limit the choices for people.”
Not only has Mr Tracey claimed that consumers could lose out if smaller brokers were “pushed out” of the industry, he has even gone far to say in a debate about regulation and the FCA at the House of Commons that “the FCA isn’t doing its job.”
This is not the first time that members of Biba have spoken out against the FCA, with many stating that they are not against regulation in itself but that the regulation the association are requesting may not be beneficial. Furthermore, some speculate that it may have an adverse effect on the market, as smaller brokers who try but fail to adhere to the regulations may be the first to go, leaving only those that try and avoid applying the regulations.
Speaking on the issue, Andy Thornley, Biba corporate affairs manager, said: “Looking at the direct cost of regulation we’re the most expensive on the planet, but if you add on top of that all of these calls for information as well, they obviously add time and you need to employ compliance people to do that. There’s a massive cost for firms and obviously small firms don’t have a lot of resource to be able to dedicate to this sort of stuff, so it’s quite important for them that we as their trade body fight in their corner.”
Meanwhile, Graeme Trudgill, executive director of Biba, said: “What we ultimately want is more proportionate and cost-effective regulation for insurance brokers. We are low risk, we are not big banks, we don’t have significant cause for concern with the regulator and so it’s something that we believe would be the right thing to do. They need a more proportionate approach and not the most expensive on the planet.”
In order to ameliorate the relationship between the FCA and insurance brokers, Mr Tracey has previously suggested that “firms that abide by the rules should not be the ones that pay for the misbehaviours and increased regulation caused by other firms.” This statement may ring true with those that work in the motorhome insurance market as the size of brokerages specialising in such products range from a handful of people to million-pound enterprises.
Unfortunately, it seems as though the FCA and insurance brokers – particularly those who are part of or support Biba – will not find an amicable conclusion to the issue of regulation any time soon. In fact, over the next few months we may see even more heated debates concerning the capabilities of the FCA as new rules come into place requiring all insurance brokers to advise their customers to shop around on their renewals documentation.