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Unification could allow more leeway for product innovation

Greater innovation in product design could follow the decision to bring general insurance and mortgage advice under the umbrella of the FSA.

While a unified regulator will remove the hurdle of multiple regulation, commentators say it will also result in restricted distribution as many brokers exit the market.

They also predict an increased cost to consumers from the move.

FSA regulation of mortgage, investment and general insurance advice will remove anomalies such as earlier this year when IFAs faced the spectre of dual regulation after stakeholder rules required the unbundling of pension and protection products, which were to be regulated by the FSA and GISC respectively.

Swiss Re technical manager Ron Wheatcroft says: “I expect to see innovation in product design. It will now be easier to accommodate general insurance with life and pension products, which our research shows is something that consumers want.

“But advice is expensive and it would be unfortunate if regulating advice meant that some intermediaries withdraw from the market and made it more difficult to get advice.”

Wentworth Rose managing director Philip Rose says: “Regulation tends to restrict product innovation but wrapping in general insurance with a product is much better than have them separately.”

Pretty Technical partner Kim North says: “There are going to be big changes in the distribution of mortgages and general insurance products. Product providers will have to be much cleverer at putting combo products together.”

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