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FSA clashes with insurers over stakeholder failings

Tiner blames lack of industry engagement for the low take-up of stakeholder products

The FSA and Association of British Insurers are at loggerheads over the failure of the basic advice regime after the regulator admitted that stakeholder products had flopped.

FSA chief executive John Tiner told the Treasury select committee this week that there had been little take-up of stakeholder because of low engagement from the industry.

Tiner said the FSA was exploring what went wrong and the lessons to be learned but refuted MPs’ allegations that the burden of FSA regulation, even in the lighter-touch regime, was responsible for some of the failings.

ABI director-general Stephen Haddrill recently told the committee that the primary reason for the failure of the basic advice regime was the regulatory involvement of the FSA, which he described as medium-touch at best.

Tiner told MPs it was interesting that straightforward and simple financial products had not taken off and questioned why the industry could not be more productive in this area.

Tiner said: “I do not know if it is a lack of firms coming to the marketplace, that they are already making money out of other things and this would slow that down or whether they feel that price caps mean they cannot make a profit. It is probably true to say the industry could be a bit more productive and lower the costs.”

Committee chairman John McFall said: “There are lessons that can be learned here, particularly with regard to the NPSS. Is it not the case with stakeholder that it was a combination of the sales process, commission incentives, charge cap and regulatory regime that all made the products uneconomic to the market?”

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