Future regulation for insurance brokers

Overview

Charles River Associates (CRA) was commissioned by the British Insurance Brokers’ Association (BIBA) to conduct research into what appropriate and proportionate regulation might look like under the UK’s new Financial Conduct Authority (FCA). In particular, CRA has been asked to assess whether the regulatory costs faced by general insurance intermediaries in the UK are proportionate to the risks imposed by the sector and to set out an overview of the desirable direction of future regulation. Following the financial crisis, the Financial Services Authority (FSA) has changed its style of regulation and supervision to take a more intrusive approach. Not only has this been applied to firms directly involved in the credit crisis, but this increased intrusion has also applied to general insurance brokers resulting in significant increases in costs. It is necessary to ensure that general insurance broking is well regulated but regulatory actions and the costs they impose need to be proportionate to the risks that they address. The industry has voiced substantial concerns that the burden of regulation is disproportionate to the risks within the sector and out of line with regulatory costs in other European countries, with recent changes to the regime exacerbating this concern.