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FSA admits extra legacy costs

The FSA has admitted there will be additional costs for insurers to comply with the ban on legacy commission despite previously saying it was factored into earlier cost estimates.

In a consultation paper published in November, the FSA said the cost of the ban had been priced into RDR cost estimates from March 2010.

Insurers rejected this argument, saying clarity only started to emerge about legacy commission in March 2011.

The regulator’s policy statement on the treatment of legacy assets says: “We estimate the additional compliance costs – if all insurers changed all their legacy systems to allow top-ups/ increases without commission being paid – to be £460m.”

The FSA says: “We recognise there are risks of poor consumer outcomes for customers with legacy products although we believe that these risks are ones we can monitor and supervise.”


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