“The issue is that in recent years we have seen regulation designed to protect consumers and the most vulnerable in society – regulation that we support – introduced in a disproportionate way.”
Those were the words of Chris Lay (pictured) during an oral evidence session in Parliament this week, as part of the Financial Services Regulation Committee’s inquiry into the secondary international competitiveness and growth objective given to the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) under the Financial Services and Markets Act 2023.
“That may sound surprising, since the perception of the industry can at times come across as opposing all regulation because it gets in the way of business. The truth is, in fact, the opposite. We welcome regulation that supports consumers and ensures the integrity and stability of the [UK financial] system. We welcome stable, proportionate, and agile regulation.”
The problem, according to Lay, lies in how the rules are applied.
He explained: “The issue is that in recent years we have seen regulation designed to protect consumers and the most vulnerable in society – regulation that we support – introduced in a disproportionate way, applying it to not only consumers but also businesses.
“The needs of consumers are very different to businesses that are usually more sophisticated and have access to considerable information and advice.”
Citing data from the British Insurance Brokers’ Association and London Economics research, Lay noted that the disproportionate application of regulation has resulted in a 40% increase in direct regulatory cost for brokers between 2019 and 2023.
“We see this on a day-to-day basis where we find ourselves being regulated not for the size of the risk we pose to the system, but by the overall size of our business,” he added. “This is relevant when we consider that insurance brokers and intermediaries do not represent a systemic risk to stability of or market.”
Lay also shared that his camp looks forward to exploring what actions can be taken to ensure the implementation of the FCA and PRA’s new secondary objectives continues to improve with the right mindset and culture.
“We cannot succeed in growing the economy without making sure we have a competitive regulatory regime,” he stated.
“This is not about a race to the bottom, but [an opportunity] to do things better so that consumers get the outcomes they need while businesses that we work with get the right outcomes they need to continue to thrive and grow.”
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