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The UK’s financial regulator is creating a new insurance definition for large corporations, succumbing to insurers’ demands that more commercial policies be excluded from expensive behavior and compliance rules.
Financial Conduct Authorities announced plans on Wednesday that plans to create existing rules for insurers to create confusion, promote insurance costs for companies and limit cover for smaller groups.
The regulator said the move was part of a set of proposals for insurers to remove “invalid, outdated or duplicate regulation” as it made more calls to Sir Keir Starmer’s government to support UK economic growth and competitiveness.
Matt Brewis, director of insurance at FCA, said: “We have listened to the industry and we are taking action – in doing so, we will reduce regulatory costs and increase the competitiveness of the already leading UK insurance industry while maintaining important protections for smaller customers.”
The latest definition of insurance “commercial or other risk contracts” will enable the definition of larger businesses with existing scale thresholds to determine which companies can call for financial ombudsmen to serve.
Regulators will continue to exclude certain types of insurance from their rules of conduct, such as aviation and maritime policies. However, these exclusions do not apply to retail consumers who purchase such covers, introducing differences on the covers of container ships and canal ships or between giant jets and small private jets.
The FCA said UK insurance companies writing policies for clients and national risks will also be excluded from behavior and compliance rules to avoid duplication and conflicts with foreign regulations.
The FCA predicts that these changes will “encourage new market entry” and says “the benefits should be brought to commercial customers through enhanced competition and new innovative services.”
For small and medium-sized companies, these changes “could lead to worse results” that no longer cover insurance contracts for behavior and compliance rules.
But it added that they are considered “sufficient resources to protect their interests” and will still benefit from some of its high-level rules.
The annual premium of the UK commercial insurance executives is around £95 billion, and have long called for changes to the rules, which they say often impose huge compliance requirements for retail consumers on contracts for large corporate clients.
“The new definition of large commercial insurance customers is particularly welcome,” said Caroline Wagstaff, CEO of London Market Group, a business representing the entire insurance industry.
“If applied throughout the rulebook, it will allow regulators to focus on protecting retail and small- and medium-sized business consumers who really need it, while reducing unnecessary regulatory requirements for corporate customers,” she said.
The introduction two years ago required the consumer responsibility rule, which required companies to ensure customers get good results, meaning it could repeal overlapping rules, including the requirement that insurers review the value of their products every year.
Retreating consumer responsibilities is the central plank of the British Association of Insurance Brokers lobbying agenda, which will hold its annual meeting in Manchester on Wednesday.
