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The new Insurance Conduct of Business (ICOB) sourcebook introduces
the Financial Services Authority (FSA)’s “principles-based
regulation” into the insurance intermediary arena.
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Principles-based regulation is designed to get intermediaries away
from the previous rule book-driven requirements which FSA feel have
led to sales processes which overload customers and lead to
potential confusion, or even miss-selling.
Under principles-based regulation, intermediaries are
encouraged to concentrate on designing processes and documentation
which can best deliver FSA’s customer focused objectives, but in a
way which is appropriate and effective to their own particular
market environment.
The new guidance, however, contains new rules targeting the
sale of PPI which aim at dealing with the particular risks to
consumers which FSA has determined exist pursuant to its Thematic
Reviews of the PPI market.
It is therefore not surprising that, from a PPI perspective,
the new ICOB sourcebook is a bit of a jumble of broad expectations
and precise requirements loaded one on top of the other. This
certainly makes it initially hard to get to grips with.
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By GlobalData But if you happen to be selling (non-protection) general
insurance face to face, the new sourcebook is a remarkably flexible
and non-specific resource which demands, by its omission as to
detail, that you take responsibility yourselves for designing the
means of meeting its objectives – at all times with an eye to
consistent matching of all the Principles for Business. I think
this is the way to approach working with the new sourcebook even
where PPI is involved.
It is not a redraft of ICOB on a principles basis, but a
totally new approach to conduct of business regulation. The devil
(for much of the new ICOB sourcebook) is not in the detail anymore
– it is in understanding that the detail simply no longer exists.
There are outcomes to achieve, but not ordained processes or
documentation for you to follow.
Having got that straight, you then (if you are concerned with PPI)
return to the new sourcebook for a second read with an entirely
different hat on, because the provisions relating to PPI (and
distance selling) are entirely legalistic and rules-based in
approach and they need to be read and responded to, in that
light.
However, be careful not to be dragged back into a totally
rules-based mind set. Every sales process (even one responding to
the PPI specific rules-based requirements) must be finally measured
against the wider objectives of principles-based regulation
(including Treating Customers Fairly).
The motor trade should therefore be approaching the PPI specific
requirements of the new ICOB sourcebook with a fully
principles-based mindset – and that may well mean demanding a
simpler and more focused PPI offering.
The simpler (and more “principles-based”) the PPI product can be,
then the easier it will be for the motor trade to meet the
challenges set by the new ICOB sourcebook.
The author is an insurance regulation lawyer at Coffin Mew
LLP
