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The Consumer Panel is today calling on the FSA Board to ensure that all consumers
are protected under the new regulation of general insurance
coming into force on 15th January 2005. The indications
are that there will be many firms who might only have interim
authorisation* at the start date. But to the consumer, interim-authorised
firms would look as if they are authorised – which
normally carries certain guarantees of compensation –
so there would be real and significant risks for consumers
dealing with these firms, if that compensation were not
there. The FSA Board did not allow those dealing with interim-authorised
mortgage companies to have access to the compensation of
the FSCS (Financial Services Compensation Scheme). If this
situation were to arise again with General Insurance, the
same mistakes must not be repeated. This is particularly
as there are likely to be many more general insurance firms
falling into this interim category, and there is more potential
for consumer loss if things do go wrong.
The Consumer Panel recommended this approach for the interim-authorised
mortgage firms, but the FSA Board did not agree to it. Not
only that, but the FSA failed to prescribe how the interim
firms should warn consumers that there would be no access
to the compensation scheme, and has not checked what warnings
are being given.
Ann Foster, Chairman of the Panel said:
"The FSA is on the brink of a new era in extending
its risk based regulation to general insurance. We believe
that the FSA would be failing in its objective to protect
consumers if some general insurance firms are granted interim
authorisation, but the FSA does not give full access to
the compensation scheme for consumers dealing with them.
There are likely to be more firms and more people involved
in general insurance than with mortgage interim firms. The
FSA Board must act in the interests of all consumers. "
1. Some insurance firms will
not pass the hurdles required to be fully authorised under
the new FSA general insurance rules by the regulation date
of 15th January 2005. To enable these firms to continue doing
insurance business, the Government (HMT) could allow firms
to be given "interim authorisation" to continue
doing business while their status is confirmed. This is what
happened with mortgage regulation. Although no announcement
has been made about interim arrangements, nor Order laid,
the Panel is concerned that this could happen again again.
Then the FSA would have to decide on consumer protection with
these firms.
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MEDIA ENQUIRIES
| Rebecca Tabor |
020 7066 0902 (07971 660368) |
| Sue Burness |
020 7066 1284 |
| David Fisher |
020 7066 0720 |
A full list of Panel news releases, publications and consultation responses can viewed at the Financial Services Consumer Panel website at: www.fs-cp.org.uk.
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