The FSA has published a statement of findings following its post-implementation review (PIR) of the Insurance: Conduct of Business Sourcebook (ICOBS) and its effect on firms’ behaviour in the insurance market. ICOBS heralded a shift from the rules-based approach in the previous sourcebook to more principles-based regulation in order to allow firms more flexibility in the manner they achieved the outcomes required by the FSA. Click here to read our previous blog on ICOBS.
The main purpose of the PIR was to assess the effect that the principles-based approach has had on the general insurance market. The FSA found no evidence to show that following the move to principles-based regulation, firms had modified their processes in ways which caused detriment to consumers.
In addition to (and despite) the move to principles-based regulation, ICOBS introduced more detailed rules for protection product sales. The second aim of the PIR was therefore to determine whether firms were implementing these rules and assess whether they achieved the desired effect of a better consumer understanding of protection products. The FSA found that firms were not meeting specific oral disclosure rules. As a result, it was not possible to assess the impact of these rules. The FSA will therefore consider changing the requirements on firms selling pure protection products.
The final objective of the PIR was to examine whether consumers were negatively affected by the FSA’s decision not to classify Private Medical Insurance (PMI) as a protection product. The FSA concluded that there was no “clear” evidence to suggest that removing PMI from the ambit of the detailed ICOBS rules applicable to protection products increased the risk of consumer detriment.
The FSA’s statement of findings is available here.
