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Tiner lays out FSA stall

John Tiner, CEO of UK regulator the Financial Services Authority (FSA) has challenged the London Market to improve contract certainty and to move to a more transparent and efficient business model.

Speaking at the LeBoeuf, Lamb, Greene & MacRae Symposium in New York on 13 December, Tiner called for an end to the "deal now, detail later" mentality, which, he said, contributed to estimates of several hundred thousand outstanding policy wordings across the insurance market and an error rate on policies of about 35 percent.

He observed: “The lack of contract certainty creates risks for the policyholder as well as the insurer and the brokers. For underwriters there is substantial operational risk related to pricing and documentation errors and delays that create uncertainty. Also the insurer has an incomplete knowledge of the risk it has underwritten and the share of any risks taken by each insurer (the signed line exposure). For the brokers there are large and unquantifiable legal risks.

Delays create treacle in the back office and ever longer more arduous reconciliations and create unnecessary costs as it is usually the broker who is left to sort out the policy wording once the cover has been written. As the business model of the brokers has come under such close scrutiny they can ill afford a fat cost base due to basic inefficiencies. And last but not least, the insureds do not know exactly what protection they have bought.

Tiner’s comments come as the FSA prepares to take on regulatory responsibility for insurance mediation on 14 January 2005 as part of the implementation of the Insurance Intermediation directive across the EU. His speech has been seen as a statement of intent from the FSA ahead of the new directive’s implementation.

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