The insurance industry and the Financial Services Authority
| DOI | https://doi.org/10.1108/eb024958 |
| Published date | 01 January 1998 |
| Date | 01 January 1998 |
| Pages | 70-74 |
| Author | Mark Boléat |
| Subject Matter | Accounting & finance |
Journal of Financial Regulation and Compliance Volume 6 Number 1
The insurance industry and the Financial
Services Authority
Mark Boléat
Received: 7th January, 1998
Association of British Insurers, 51 Gresham Street, London EC2V 7HQ; tel: 0171 600 3333;
fax: 0171 696 8999
Mark Boléat is Director General of the
Association of British Insurers. He has
degrees in Economics and Contemporary
European Studies and before joining the
ABI in 1993 was Director General of the
Council of Mortgage Lenders and the
Building Societies Association.
ABSTRACT
Insurance has been seen as a distinct function
and discipline. Over the
last
few years, market
changes have lessened the distinctiveness of
insurance. This is being
reflected
in the govern-
ment's
proposals
for a new single
regulator
for
financial institutions, the Financial Services
Authority. The new regulator will further
reduce the distinctiveness of
insurance
by
seek-
ing to apply common systems to all financial
institutions. This has some advantages for some
insurance companies, in particular the large
diversified companies, but it also has disadvan-
tages, particularly in terms of
costs
and transi-
tional problems.
THE PRESENT POSITION
Insurance has a long and proud history as a
distinct function in institutional terms and
a distinct discipline in professional terms.
The first legislation regulating insurance
companies in the United Kingdom was the
Life Assurance Companies Act of 1870
which, like most pieces of legislation on
financial regulation, followed a spectacular
failure. The current legislation on the regu-
lation and supervision of insurance compa-
nies is the Insurance Companies Act 1982.
This is supported by the Policyholders'
Protection Act 1975 which protects policy-
holders in the event of an insurance com-
pany failing.
The legislation is all-embracing and par-
allels the species legislation for banks, cur-
rently in the form of the Banking Act
1987.
While there is much similarity
between the two pieces of legislation, there
are also differences between banking and
insurance.
The insurance company legislation is
concerned purely with the supervision of
insurers as institutions and says little or
nothing about conduct of business. But the
nature of insurance is such that some regu-
lation of conduct of business is essential.
This is currently provided through a
number of different mechanisms which, to
the outsider, must appear at the least com-
plex and at worst bizarre.
The Financial Services Act 1986 and the
regime set up under that Act regulate the
selling of long-term business, that is life
and pensions. In this respect, insurance
companies are treated in a similar way to
unit trusts, ie as product providers and
independent financial advisers in terms of
their selling activity. There are detailed
conduct of business rules in respect of life
Journal of Financial Regulations
and Compliance, Vol. 6, No. 1,
1998,
pp. 70-74
© Henry Stewart Publications,
1358-1988
Page 70
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