Few, if anyone, could better articulate the sheer weight of the regulatory burden facing insurance brokers throughout the UK than Steve White managed to in the British Insurance Brokers’ Association (BIBA)’s 2021 Manifesto. In his capacity as chief executive of BIBA, White emphasised the regulatory pressures facing smaller firms, and the effect this is having on those businesses.
“We call on the FCA to consider the impact of their regulation,” he said, “bearing in mind more than one in four employees in smaller firms are focused entirely on regulatory matters.”
It only takes a swift glance at BIBA’s ‘Regulation Updates’ webpage to get an understanding of the full breadth of the issue – one that is particularly concerning right now given the significant financial turmoil faced by so many insurance firms as a result of the COVID crisis. While there can be little doubt of the role that regulatory services play in maintaining the health of the insurance ecosystem; from industry conversations, it seems to me that there is growing concern that the concept of ‘proportionate’ is being lost within the phrase ‘proportionate regulation’.
Somewhat appropriately considering the burden they’re carrying, insurance firms are faced with a Buridan’s Donkey scenario – torn ceaselessly between wanting to automatically measure up to regulatory standards and having to navigate what those standards are and what they will mean for their ongoing business continuity. And every week seems to bring a new reminder, a new proposal or a new warning from the regulatory sphere that shapes the insurance sector.
From BIBA’s manifesto, it was highlighted that in March of this year, the FCA announced its proposal to increase application fees and introduce transaction fees, while the Financial Ombudsman Service wants more money from both its general levy and case fees, Meanwhile, the Financial Services Compensation Scheme announced an indicative total levy of over £1 billion.
With the uncannily prescient eye of the Chartered Insurance Institute (CII) firmly fixed on the need for professionalism across the spectrum of insurance services, there is no doubt that the future of the insurance sector lies in becoming as coherent, professional and knowledgeable as possible. And to make professionalism the automatic response of insurance firms means ensuring that this response is accessible to all such businesses.
If regulatory barriers and operating costs are set too high then start-up insurance brokers, in particular, are simply less likely to take that route. This will reduce the number of professional brokers operating in this space, and have knock-on effects on customers and the support they’re offered which, in turn, will not do the reputation of the profession any favours.
Over the last year, there has been a lot of attention turned on how insurance businesses have reacted to the COVID crisis – from which firms have made sizeable charitable donations, to which insurers have made premium rebates to their clients, to which brokers have gone out of their way in providing policy adjustments to cash-strapped customers. And, without turning this into a diatribe along the lines of, ‘ask not what your insurance firm can do for you, but what you can do for your insurance firm’, I would urge the importance of give and take in this, as in all matters.
Many insurance businesses, particularly smaller broking firms, are facing exactly the same concerns, risks and challenges of the clients they care for, and they are doing so while caring for these clients and providing knowledge, expertise and, that quality that has come into its own since March 2020, empathy. These firms must be given the time and patience needed to unjumble the impacts that COVID has had on their operations and given the space to get back on their feet without the long arms of the law and public opinion waving a stop sign every time they put a foot wrong.
This is not just a matter for the FCA, or any one regulatory body, it extends to the Press, insurance consumers and anyone who believes that empathy and tolerance can be ascribed only to individual people, and not the many people who make up corporations.
Insurance firms need to be on the frontline of this discussion. They need to be the ones to write to the regulatory bodies in question and make their requirements clear. Only in this way, can they be suitably addressed, to the benefit of all involved stakeholders.
So, in short, the ‘Dear CEO’ letters don’t need to stop, but the ‘Dear Executive Director’ letters might need to start.