The Financial Services Authority (FSA) is to take over the regulation of sales and advice on all health insurance products, the Treasury has announced.
From 2004, around 14,000 brokers and advisers will come under the FSA’s remit, in a move that is likely to consign the two existing voluntary regulators, the General Insurance Standards Council and the Mortgage Code Compliance Board, to the history books.
Crucially, it also means the date when the FSA was due to take over the regulation of mortgage lending, dubbed ‘N3’, will now be delayed. This is so that all new responsibilities including general insurance and life protection products will come into effect at the same time in 2004.
Economic secretary to the Treasury Ruth Kelly explained that the FSA’s new powers would offer consistency and protection to millions of consumers because many mortgage lenders also sell general insurance and life protection products.
The consumer now has a single regulator and importantly the aid of the Financial Services Ombudsman when complaints are made.
Although final details will be worked out through a consultation exercise, it does seem likely that the most obvious effect will be higher penalties for firms for cases of abuse.
For industry reaction to the Treasury decision, see Analysis, pages 16 and 17.