The FSA is considering whether the industry and consumer groups should help develop minimum standards to ensure retail financial services products are fit for purpose.
In its feedback statement on product intervention, published this week, the FSA says consumer bodies have called for minimum product standards to be introduced, devised by a cross-industry standards committee.
The statement follows the FSA’s January discussion paper on product intervention, which proposed granting the regulator powers to intervene earlier in the product cycle.
Consumer bodies told the FSA that minimum standards could reassure consumers and would mean greater consumer participation in the product design process. The FSA cites the Association of British Insurers’ work on the total and permanent disability clause within critical-illness policies as an example of where industry minimum standards have been put into practice.
The regulator says that such industry-developed standards or codes of practice may be more flexible as well as quicker to update than regulation.
The FSA says: “We consider that there may be some merit to adopting industry-set minimum standards. However, for such a regime to be effective, it would require the enthusiastic participation of all stakeholders, inc-luding firms, consumer representatives and industry bodies, and the industry would collectively need to ensure that the regime was managed by an effective independent accreditation and supervision scheme.”
Highclere Financial Services partner Alan Lakey says: “The ABI work on critical illness was done with the best of intentions but the outcome was ineffective. Consensus tends to result in compromise and you end up achieving little more than upsetting the least number of people.”