Many in the financial services profession hoped Brexit would bring with it a bonfire of red tape that pushed the price of their products and services up.
This year’s Queen’s Speech finally saw Prime Minister Boris Johnson’s government promise to deliver a new regulatory framework to guide the insurance and personal finance profession into a new era outside of the European Union.
The new Financial Services and Markets Bill, announced in the Queen’s Speech, contained a raft of reforms that HM Treasury promised would at last cut red tape while maintaining high regulatory standards – a far from easy feat to achieve given that for the last couple of decades the European Commission, Parliament and Council created a great deal of the detailed rules for financial services in this country.
Since the early 2000s, UK regulators took an approach of simply copying and pasting European Union law into the insurance and personal finance profession’s rulebooks, rather than creating their own rules.
Now that the UK has left the European Union, the Conservative government can shift their focus from the COVID-19 pandemic.
HM Treasury has proposed amending existing regulation to make it possible for the Financial Conduct Authority and Prudential Regulation Authority to take on most of the rule making powers that existed at EU level.
To balance this, they have also proposed new oversight rules for Parliament and HM Treasury over the statutory regulators. These oversight powers include a new statutory panel to oversee the regulators’ work on cost benefit analysis, which is already required every time regulators make new rules.
New powers for HM Treasury and Parliament to direct the regulators to review and reconsider specific rules are also set to be granted.
This new regulatory environment creates opportunities for correcting some poor outcomes created by EU rules.
For example, in 2021 the FCA launched a review of the European rules on investment disclosure documents (key information documents) which were exceptionally poorly designed and contained information that was actively misleading for consumers.
The new Financial Services and Markets Bill also creates opportunities for discussions around the nature of regulatory reform and what it should aim to achieve.
In the personal finance and insurance space, two key issues that have emerged are the extent to which future legislation should prioritise the UK's international competitiveness and the extent to which regulators should be addressing issues for people on low incomes, who are not a specific protected group under the Equality Act.
Prioritising outcomes for people on low incomes would help expand access to financial services including core insurance products and financial advice, tackling reputational issues for insurance and personal finance in the process.
We have long called for improved access to affordable insurance products and financial advice as both are vital to improving the financial resilience of consumers and public trust in the profession in the years to come.
This government has promised to level-up and the current set of financial services rules, such as Solvency II for insurers and the unpredictable and volatile system of funding compensation for investors, push the price of some products and fully regulated financial advice out of the reach of consumers who would benefit from the peace of mind insurance and financial planning provides.
As we adjust to a UK outside of the EU, the Chartered Insurance Institute will engage with rule makers to identify ways regulations can be changed to ensure our profession can help more people improve their financial resilience.
