The Association of British Insurers has called for the Prudential Regulation Authority’s statutory insurance objective to protect consumers before they become policyholders to be removed.
The objective is to provide an appropriate degree of protection for those who are, or are about to become, policyholders.
Giving evidence to the joint committee on the draft Financial Services Bill last week, ABI director of prudential regulation Hugh Savill said the requirement to protect consumers who are not yet policyholders does not fit with prudential regulation.
He said: “If this was the conduct regulator I would understand it because a lot of conduct regulation is applied, in effect, before someone becomes a policyholder. In terms of prudential regulation, it is very difficult to see what it adds and it is a very nebulous concept. As a result, we would prefer it to be taken out.”
The Financial Conduct Authority does not have a specific insurance objective.
Savill told the committee it is difficult to see how insurance firms could work to protect consumers who are not policyholders and said the interests of actual policyholders should be “at the heart” of the new regulatory system.
The objective was given to the PRA after the industry raised concerns that the regulator would be too focused on banks and would not adequately take into account insurers’ business models.
Despite his concern about the objective, Savill said: “We take comfort from the fact that insurance supervisors from the FSA, who have done a good job over the past 10 years but have had little credit for it, will be moving to the PRA.”