ABI steps back from battle over projection figures
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The Association of British Insurers has drawn up draft guidelines for members on projection rates after accepting the FSA will not budge on the issue.
In December, the ABI held an emergency meeting to discuss lobbying the FSA following a strongly worded letter from the regulator’s director of conduct risk Dan Waters to compliance officers, insisting providers must use lower projection rates for cash and that caveats would not be tolerated.
ABI members argued that benefits to consumers would not outweigh the substantial cost of updating systems.
One provider estimates the cost to be around £500,000, suggesting the industrywide bill would be around £5m.
The ABI last week updated members on a recent discussion between director of life and savings Maggie Craig and FSA director of conduct policy Sheila Nicoll whereby Nicoll reaffirmed the regulator’s stance was “not open for discussion”.
The FSA has scheduled a follow-up survey in the third quarter and is expecting providers to be compliant by then.
One provider says: “This is an absolute nonsense. The FSA has decided to throw its weight around,but there are ways to deliver this that would be a lot less expensive. But the industry will breathe a deep sigh, do whatever it needs to do and the cost of running the business will increase.”
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Readers' comments (3)
Anonymous | 25 Mar 2010 2:21 pm
"This is an absolute nonsense"
Tell us why!
Projections have been a bone of contention since Scot Am and others used astronimical figures which brought about the imposition of the "LAUTRO assumed expenses" regime.
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Richard Brown, Managing Director, Moneynotion Limi | 25 Mar 2010 6:04 pm
I don't understand how using a different number in the rate of assumed growth is going to cost one provider £500,000.
All one has to do is change 3 numbers (if one assumes 3 rates of growth) and the computer should recalculate it. Our spreadsheets do this in less than the blink of an eye, so I am pretty sure a large computer at a product provider can do it quickly.
Or is it that their IT department is inefficient? I studied for a data processing degree some years ago and more than 25 years on I am astinished at the poor IT systems evidenced at some providers.
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collywobbles | 30 Mar 2010 11:44 am
Richard,
Just in response to your comment above - speaking from a software point of view (from experience) its not as easy as just ammending figures.
We are talking about specially written software, which is often hard-coded by programmers to perform a specific task.
Its often the case that the programme needs to then be re-written at its base level (its code) and then tested and re-tested rigerously in many different scenarios to ensure its compliance and reliability.
£500k is a reasonable estimate when you consider the bill to pay programmers/project managers a wage to ammend, test and implement such systems.
I do agree in principal with the comments above however, is this cost then passed onto the consumer? Perhaps these systems should have been 'more flexible' in the first place. ??
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