Transparency is a word that has been used quite a bit in regulatory circles over the years and it came up again while the Financial Services Act 2012 was going through Parliament.
The Act contains two transparency objectives for the new FCA: that the FCA itself must act in a transparent manner, and that the FCA must compel firms to act in a transparent manner. Earlier this year, just prior to the legal switch over to the new regulatory structure, the FSA/FCA launched a discussion paper on transparency and how it could go about meeting these new objectives. The paper was very high level, introducing a number of proposals and asking for comments. It was encouraging to see that the regulator understood the difficulties involved with some of these proposals (such as the publication of claims data) and this was reinforced in the many meetings the ABI had with the FCA.
Promoting transparency
The feedback statement to the paper was published yesterday and shows that the FCA is keen to continue to work with the industry to promote transparency in a number of areas, particularly in publication of claims data and also improving transparency in the annuity market. It is really important that customers get the information they need to make financial decisions while not being overloaded – more information does not necessarily mean ‘transparency’.
The FCA was pleased to note that the ABI had already taken the initiative in these areas. This means that we are in a great position to work proactively with the regulator, to demonstrate the good work the insurance industry has already done in order to be more transparent for their customers, and highlight any practical challenges. The FCA intends to wait until the thematic reviews on annuities and general insurance claims handling are completed before moving this work forward so we will not see formal moves on this until early 2014.
I was pleased to see that a number of the suggestions that the ABI made for how the regulator could be more transparent were taken on board. These included being more open about the way decisions are made, a commitment to publish more details about executive committees and reporting on the FCA’s performance measures.
However, I was disappointed that despite widespread calls for publication of more in-depth information about the use of Section 166 (the FCA’s power to commission reports by a ‘skilled person’), the regulator has decided not to proceed with this suggestion. The ABI has long been vocal regarding the need for more transparency of the cost of the regulator overall and the publication of the proposed FCA value for money strategy later this year will be very welcome.
Industry engagement
A framework for transparency initiatives was published alongside the feedback statement. This makes it clear that the FCA is aware that any regulatory intervention could do more harm than good and will thoroughly investigate any new initiatives, including using existing and on-going thematic work as a basis for any new policy.
So, while the FCA has clearly signalled its intentions in the feedback statement, it is good to see that there are plans to carry out further investigation, wait for the findings of current thematic reviews and engage in discussions with industry before rushing to write new policy. The new FCA is working hard to differentiate itself from the old FSA and certainly I have seen this in the way in which the regulator engages earlier with trade bodies to flag up any issues discovered in the thematic work. This has its difficulties, but it is a positive development.
Jacqui Thornton is the ABI’s Policy Adviser, Distribution