New Insurance Regulations to Lead to Higher Premiums, Warns UK's Largest Insurer

Strategic Insights -

A new wave of insurance regulations set to take effect on Friday will result in increased premiums for consumers, according to Patrick Snowball, the chief executive of Norwich Union. The Financial Services Authority (FSA) will take over regulation of 36,000 companies, including insurers, under the European Union's Insurance Mediation Directive. Snowball argues that the FSA's requirements will lead to unnecessary costs and red tape, with an estimated £2.80 per policy being added to fund the FSA's demands. This cost will be met mainly through increased premiums, affecting an estimated 77 million policies.

Key Takeaways:

  • 36,000 companies will fall under the regulation of the Financial Services Authority (FSA) from Friday.
  • The FSA's requirements will lead to an estimated £2.80 per policy in costs, which will be met mainly through increased premiums.
  • An estimated 77 million policies will be affected by the new regulations.
  • The insurance industry currently falls under the scrutiny of the General Insurance Standards Council (GISC), but the FSA will take charge from the GISC to comply with the European Union's Insurance Mediation Directive.
  • Norwich Union has amended nearly 1,200 documents, updated almost 30 computer systems, and provided training for 24,000 staff to comply with the FSA regulations.
  • On average, a Norwich household policy will have 12 more pages of paperwork due to the new regulations.
  • 92% of insurers believe the FSA has substantially underestimated the cost to the industry of complying with the new regulations.
  • 96% of senior managers believe "many firms" will miss the deadline for compliance.

Statistics:

  • 36,000 companies will be regulated by the FSA.
  • 77 million policies will be affected by the new regulations.
  • The estimated increase in premiums will be £2.80 per policy.
  • 1200 documents have been amended by Norwich Union to comply with the FSA regulations.
  • 30 computer systems have been updated by Norwich Union to comply with the FSA regulations.
  • 24,000 staff at Norwich Union have received training to comply with the FSA regulations.
  • 12 more pages of paperwork will be added to average household policies due to the new regulations.
  • 92% of insurers believe the FSA has underestimated the costs of compliance.
  • 96% of senior managers believe "many firms" will miss the deadline for compliance.

Sources:

  • "New insurance regulations 'to lead to higher premiums'." BBC News.
  • Ducocorp survey cited in BBC News article.
  • Norwich Union, Financial Services Authority, and General Insurance Standards Council quoted in the article.