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 Consumer 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. "

NOTES TO EDITORS:

1. The Financial Services Authority (FSA) took on responsibility for the regulation of sale and advice of mortgages from 1st November 2004, and is due to take on the regulation of General Insurance from 14th January 2005.

2. The FSA established the independent Financial Services Consumer Panel in December 1998 to advise its Board on the interests and concerns of consumers and to report on the FSA’s performance in meeting its objectives. The Consumer Panel has statutory status. The FSA must consider its representations and, if it disagrees with a view expressed or proposal made in the representation, it must give the Panel a statement in writing of its reasons for disagreeing.

3. The emphasis of the Panel’s work is on activities that are regulated by the FSA, although it may also look at the impact on consumers of activities outside but related to the FSA’s remit.

4. The Consumer Panel brings together a wide range of relevant experience. This includes financial services regulation, working with vulnerable consumers, consumer protection, consumer education, front-line money advice, legal expertise, competition policy, public policy analysis, market research and media.

5. There are currently fourteen members of the Panel as listed below (for further information on individual members, see the Panel’s Web site at www.fs-cp.org.uk):-

Ann Foster (Chairman)
Dianne Hayter (Vice Chairman)
Yvonne Gallacher
Harriet Hall
John Howard
Vinod Kumar
Stephen Locke
Nick Pearson
Adam Phillips
Paul Salvidge
Robert Skinner
Carol Stewart
Richard Smethurst
Dave Watts