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The critical illness of regulatory creep

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There is a school of opinion that critical-illness insurance is fast reaching the end of the line, with concerns about new and confusing conditions being added at an unprecedented rate. Many of these offer scant chance of a claim due to the low annual incidence or the discriminatory terms of the plan claim wordings.

However, some conditions present such a potential risk that maybe they should be included as a matter of urgency. Regulatory atrophy is one such recently identified condition. It displays such a relentless and insidious creep that it may eventually become a staple of all UK critical-illness plans.

Each year, the numbers of regulators increase like flies on a dead dog, with 4,000 at the FSA, 1,500 at the Financial Ombudsman Service, as well as the 181 currently housed at the Financial Services Compensation Scheme. As a result, the claim incidence is also multiplying.

This vile condition first presents as an inability to think in a cohesive manner or to link strategies and concepts together. The clinical manifestation shows an inability to provide balanced judgement with rationality also being irrevocably lost, swiftly followed by the expounding of bizarre hypotheses.

The final stage involves outlandish theories being forced on all and sundry with an apparent intimate knowledge of how to circumvent factuality.

When confronted by professional help, the sufferers frequently explain their idiosyncratic suppositions by reference to ancient surveys, archaic statistics and false prophets. “Trust me,” they howl, “we know best”.

Treatments are being urgently sought and many have expressed concern at the potential for a pandemic. An antidote has potentially been identified but the real problem is in forcing victims to accept they are infected and thus take the cure. Professionals are investigating how best to synthesise reality into some administrable form so that inoculations can be given to all bureaucrats, current and potential.

Some weeks back, Nic Cicutti poked fun at the proposition that the retail distribution review could be challenged via a judicial review. Regardless of the individual viewpoints expressed, it is a constitutional right that concerned parties are able to challenge Government bodies and otherwise unaccountable quangos when they indulge in behaviours that impact in a destructive way.

Nevertheless, as pointed out in a previous column, the theory and the practice of justice are sufficiently far apart that few are nimble enough or sufficiently deep-pocketed to mount such a challenge. The rules for commencing a judicial review insist that it commence within three months of knowledge of the matter being questioned.

Now one might reasonably suggest that the relevant date is March 31, 2013, three months after the RDR deadline. However, legal experts advise that the relevant date is three months after the revised rules on qualifications appear in the FSA handbook. Guess what? The revised rules were inserted without fanfare in January of this year so a legal challenge via a judicial review cannot be mounted unless the court admits exceptional circumstances.

As many have noted, the path towards justice is littered with obstacles. Money is one of them and the judicial review timeframe is another. How ironic that our industry has been denied the long-stop defence, an injustice decried by an overwhelming majority within the industry, yet when seeking the Court’s opinion on another injustice we are denied access due to a time bar.

Alan Lakey is partner at Highclere Financial Services

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Readers' comments (9)

  • A very good article Alan. It deals with some very serious concerns in an engaging way. The issue around money to be able to fight a cause is a very real one. The structure of the IFA market place make it very difficut to develop deep pockets in the way the large provider companies can. Neither are we able to collectively come together with any meaningful presence.

    You have identified our problems, but as yet we are no closer to dealing with them. However, there are small windows of opportunity provided by the TSC who want an inquiry into the powers of the new regulator. We should take this and use it.

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  • Alan, as usual, right on the money. For several years the only growing industry in the UK (and EU I guess) has been regulation. Of course we need some but I feel we have long passed the point where the benefit of the next regulatory employee or expensive, bright idea initiative has been worth the cost to the public. In financial services I think 'diminishing returns' has now reached 'increasing detriment'. Why else would we need such 'drastic reform' after 20+ years of expensive and intrusive regulation - well, intrusive into the wrong areas anyway.

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  • Spot on as usual Alan, at least the Libyans have been able to fight for their rights, maybe we need to take a leaf out of their book, as we do not seem to have any legal rights!! When will more politicians wake up to the destrution of our democrocy.

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  • I agree the growing numbers of staff and vast salary levels at the FSA, FOS etc will eventually kill the industry. over regulation and endless pointless rules and retrospective penalties I can go on ! Lets assume that every product sold in the uk had to have justification & warning signs stamped all over it with information on how to claim compensation against the provider or salesmen who sold it we would be broke as a nation. I for one will not and cannot take any more regulation after 36 years in the industry with an unblemished record without any issues of any description have had enough and will leave the industry December 2012

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  • Yes, a good article, but IFAs, by the very nature of their job, will never form an organised group able to fight for their interests and therefore the interests of their customers. Economic forces will out in the end - as Marx said. The industry has decided to get rid of IFAs just as it got rid of direct sales forces a few years ago...

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  • The only way a judicial review will ever take place is if the likes of Hargreaves Lansdown has their nose shoved out of joint by the FSA rules and then shareholders may demand such.

    Most of us are just worn out with it all and have enough to do in our day to day job without fighting every issue.

    Sad as that may seem, you can't fight on all fronts and you should only take on the battles that you are going to win.

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  • Superb article (must have ingested a dictionary) but syaye of affairs correctly identified.
    Rod if only IFAs had OIL, the Americians would have bombed the FSA by now and liberated us from their grasp and set us free from RDR.
    Ken - you are right. Unless IFAs stand up to the FSA et-al, they are doomed and of course if they haven't done by now they won't. A mass picket outside Canary Wharf may get the media to take notice at this late stage but we are / have run out of time.
    Take our cause to the E U court of human rights? but we don't have anyone to represent us (AIFA - HAH!)

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  • Of course, Alan is right with regards to creeping regulation. But it doesn't end with the quangocrats and bloated bureaucracy at the FSA and FOS. Because of the FSA there are thousands of people employed in compliance roles in banks, insurance companies, IFA practices and networks. Then there are the thousands employed by other quangos such as the ASA, ICO, OFT.....the list goes on. And finally there is the extra workload which every IFA has to endure, writing 10 page reports to recommend £1,000 into this year's ISA or duplicating the Key Facts for a mortgage recommendation by embedding the information into a suitability letter. And don't forget to tell the client about all the 'products' you haven't recommended and why - bloody crazy !

    I have been an IFA for 19 years. I have been Diploma qualified for 16 years and hold 2 degrees. I have never had a complaint. But I'm getting out - enough is enough ! I'm sure all my clients will thank the FSA for their contribution towards my early retirement.

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  • Alan is Spot on with his observations, unfortunately it is part of the UK Culture now, the last government wanted to create a 1,000,000 jobs. So they created them by creating jobs in the public sector and regulatory sectors such as Financial Services and Health and Safety. The jobs created were to tell the ever decreasing Private sector what to do and how to do it !!! And charge us to do it. Hence the UK is 52% Public Sector and 48% Private Sector against China’s 26% Public Sector and 74% Private Sector. Even a country with a Communist regime knows that the way to make money is through the private sector. Instead of creating ways to stop industry maybe it should spend the money and resources to grow it. It is not rocket science...... We need a miracle of Biblical size !!

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