Regulation will bring extra protection for mortgage and general insurance consumers

John Tiner told a Parliamentary reception:

"Our approach has been to design a set of requirements for these sectors that:

• retains the consumer benefits of an innovative market place with a wide range of providers, of delivery channels, and of products;

• improves consumers ability to understand and compare the products on offer so that they can make informed choices;

• provides for suitable advice where consumers choose to obtain advice; and

• protects consumers, relative to their exposure, such as building in additional safeguards for lifetime mortgages which are higher risk.

"Consumers will get clear information about their mortgage and general insurance products covering essential product features before sale. The documents will be marked with a Key Facts logo, and consumers will be encouraged by the sales process to focus on these to help them understand products and shop around. The new regulatory approach will provide consumers with access to the Financial Ombudsman Service (FOS) and to the Financial Services Compensation Scheme (FSCS).

"It's nearly five years since the government asked us to regulate mortgage business and nearly three years in the case of general insurance. It has taken a lot of hard work and a great deal of co-operation from the industry to create this practical regime that addresses the key risks to consumers in a proportionate way.

"The focus now turns to the future supervision of the mortgage and general insurance industries, with a risk-based approach that makes better and wider use of available market data to assess risks that arise within firms, products and markets."

Notes for editors

1. John Tiner was addressing a House of Commons reception co-hosted by the FSA and the All Party Insurance and Financial Services Group to mark the start of regulation of mortgages and long-term care insurance on 31 October 2004 and of general insurance regulation on 14 January 2005.

2. Key benefits of mortgage regulation are:

   • consumers will receive clear information pre-sale about both mortgages and mortgage services, that will allow them to shop around more easily;

   • where giving advice, firms must ensure they offer the consumer a suitable mortgage product;

   • price information (including the APR) in any mortgage advertising and marketing material must be clear, and any advantageous features of products quoted in advertising must be balanced by a description of any associated drawbacks;

   • both lenders and advisers have to consider the affordability of any mortgage that they identify for individual consumers;

   • there are new measures to help borrowers in arrears on their mortgage or facing repossession;

   • lifetime mortgages will be subject to additional disclosure requirements to take account of the higher risks associated with these products; and

   • mortgage borrowers will have access to an independent dispute resolution service the Financial Ombudsman Service (FOS) - and to the Financial Services Compensation Scheme (FSCS).

   • Key benefits of general insurance regulation are:

   • retail customers will get clearer information on their policy before they buy it (including details of significant and unusual exclusions), which will help them to shop around;

   • where they give advice, firms must ensure the product recommended is suitable for the consumer;

   • premium and claims money held by brokers on behalf of customers (client money) will be protected;

   • claims must be handled fairly and promptly;

   • long-term care insurance (a higher risk product) will be treated as an investment in terms of the level of protection provided; and

   • retail and small business customers will have access to the FOS and the FSCS.

3. The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; securing the appropriate degree of protection of consumers; and fighting financial crime.

4. The FSA aims to maintain efficient, orderly and clean financial markets and help retail consumers achieve a fair deal.

5. Further details about Mortgage and General Insurance Regulation can be found here on the FSA website.