Since the summer, it has at times seemed that perceptions of the insurance industry’s priorities varied widely and wildly depending on whether you worked within it or not.
Many external commentators appeared preoccupied with speculation about whether the new Chancellor of the Exchequer, Rachel Reeves, would increase the rate of Insurance Premium Tax (IPT) to help plug the fiscal ‘black hole’ which she reported having inherited from the previous Conservative administration.
To a degree, they had a point.
After all, the IPT was last changed in June 2017.
Since then, the amount of revenue which it generates for the Treasury has increased considerably – up 43 per cent to £8.146 billion to April this year.
Whilst insurance professionals were certainly keeping an eye on what the contents of last month’s Budget might mean for them, however, they had other complicating certainties to contend with.
Chief among them was the impact of the Consumer Duty regulations, introduced by the Financial Conduct Authority in July 2023.
Their aim was to protect both individuals and organisations who buy insurance and other financial services, ensuring that they would be able to buy products which were not only suitable for their needs but constituted value for money.
As I said at the time, Broadway’s unequivocal position was that compliance with robust procedures is both necessary and important to maintain the trust of both current and prospective policyholders.
I know well from my current role as Chairman of the British Insurance Brokers’ Association (BIBA) Manchester regional committee that my industry peers share that view.
That change, though, has not been effected without a significant cost.
Implementing Consumer Duty has created a tremendous strain, requiring brokers like ourselves to complete what is known as a ‘fair value assessment’ relating to every single product sold by every insurer which might be offered to any of our clients.
The administrative resource required to comply compounded the FCA’s twice yearly demands for information about how insurance and the rest of the financial services industry perform.
Those details, contained in what are referred to as Retail Mediation Activities Returns (RMARs), are condensed into annual reports giving a comprehensive picture of the sector.
Some might say that the original intention of Consumer Duty – delivering a positive impact for those buying insurance – has been overtaken by the cumbersome weight placed on the shoulders of those in the profession.
It could also be argued that the effort needed to meet the obligations which Consumer Duty brought about has posed a challenge for smaller brokers by potentially diverting time which might otherwise be spent helping clients more directly.
The situation has not, in fairness, been lost on the FCA itself.
In July, it published a discussion paper seeking views about whether the objectives of Consumer Duty could be achieved without “placing unnecessary regulatory costs on firms or impacting innovation“.
One of the points which it sought feedback on was which policyholders it should apply to.
That point of clarity is important because the industry handbook which sets out how our customers should be treated – the Insurance Conduct of Business Sourcebook (ICOBS) – has not had a “consistent definition” to distinguish between SMEs and larger corporate entities since it was first published in 2008.
It is not a moot point, given that SMEs now account for 99 per cent of all companies in the UK and a proportion of many brokers’ client rosters.
Last week, the FCA’s Chief Operating Officer, Emily Shepperd, told a London conference that the Authority was intent on “listening to firms and actively looking to refine the rulebook” in order to ensure “proportionate regulations“.
It was part of an approach which she summarised as presenting “strong infrastructure for smooth journeys”.
The FCA is aware that many of my peers in insurance regard the period since Consumer Duty took effect as more of a bumpy road.
Nevertheless, the prospect of a reduction in the scope and compliance workload associated with Consumer Duty enabling everyone to focus on our collective goal of better serving customers is a welcome one.
This has been something of a sharp learning curve all-’round and one which might perhaps be avoided in future by having consultation about how future changes might be implemented before they are introduced.