The insurance sector has taken something of a hammering during the last few weeks. Chancellor George Osborne rubbished annuities in his Budget and that afternoon share prices in some specialist annuity providers crashed by 50 per cent or more.
Then a briefing to The Daily Telegraph from the FCA about a possible review of 30m policies sold by insurance firms saw a huge market sell-off.
The Government hit insurers again with the introduction of a charge cap on pensions, with pensions minister Steve Webb claiming fees charged by providers will be “put in a vice”.
It would be very easy indeed to see a conspiracy here. The Government hates insurers, they are a soft target and are going to be made to pay for unspecified sins of the past. But what is it they are going to pay for?
Well, the insurance industry is not particularly client-centric. I suspect the Government thinks it would rather sell high-priced products to consumers who do not really understand what it is that they buying and impose heavy exit penalties on them if they have the temerity to try to leave.
A history of misselling does not help.
As IFAs we know that the world is a much different place now. We also know that we have helped to improve the lot of consumers.
But it is always easy to carry out reviews with the benefit of hindsight; it is much harder setting the right tone and values for future insurance products.
IFAs may well find themselves enjoying a degree of schadenfreude.
After all, the poor way that many of these firms treat their IFA customers is well reported.
Poor administration is still rife and the suspicion that some of these businesses would rather see the demise of the IFA and be left to their own devices is a commonly held view.
But perhaps there are signs of a fightback and the lobbying of the Chancellor has resulted in his very strongly worded response to the FCA’s chief executive Martin Wheatley. It is a bit hypocritical though, coming from the same person running the organisation it is alleged caused the disorderly market with that policy review media briefing.
But if the Government is to shift the burden of financial support away from the state and on to the individual it needs a vibrant and effective insurance sector.
The UK financial services industry adds over £116bn a year to the UK economy, employing well over 1m people and paying taxes of over £63bn a year, 11.6 per cent of total tax receipts in 2012.
The regulator also needs to remember it is funded by industry. Striking the right balance between effective regulation for the purpose of consumer protection and maintaining confidence in such an important sector is vital.
With any luck, the recent combined assault on insurers by Government and regulator alike will have delivered the much-needed wake-up call the sector needed to reform, with some urgency. It is to be hoped that it
will also be the last series of damaging announcements delivered about an industry in dire need of a period of stability.
Martin Bamford is managing director at Informed Choice