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FSA/PN/116/2005
7 November 2005

The Financial Services Authority today set out further details of the post-implementation reviews of the mortgage and general insurance regimes.

The reviews, announced by FSA Managing Director Clive Briault earlier this year, will investigate the effectiveness of the regimes, focusing initially on how far the FSA conduct of business requirements for mortgage and general insurance firms are delivering the intended outcomes for consumers.

Dan Waters, Director of Retail Policy Division at the FSA, said:

"Effectiveness reviews are part of the FSA's approach to seeking to ensure that major policy interventions in the market are making a real difference in practice.

"Naturally we recognise that it is still early days, and that we have to be realistic about the timescales in which the various objectives of the new regimes may be achieved. That's why the reviews are rolling programmes which will measure the outcomes of the regimes in stages"

The FSA has identified disclosure requirements, and advice and selling standards, as key areas within both regimes where it plans to undertake early consumer research.

The reviews will employ a variety of different tools to test the effectiveness of the regimes. In addition to consumer research the review teams will analyse statistical information, including regulatory returns and market/economic data. There will also be mystery shopping to test if consumers are clear whether a sale is advised or non-advised and whether suitable mortgage and general insurance recommendations are being made.

From 2006, the FSA will also be undertaking a study looking at changes in consumer attitudes and behaviour over time. This research will provide a baseline for the current impact of the mortgage and general insurance regime on consumers, and will be repeated periodically so that the longer term impacts of these regimes can be monitored and assessed.

The first stage of the mortgage review will begin at the end of this year, and the FSA will be aiming to feed back the initial findings in the summer of 2006. The general insurance review will begin in April 2006, and the overall findings should be available towards the end of 2006.

If after the first stage of the reviews, any rule changes are considered to be necessary, the FSA will consult on proposals in the usual way, including a full cost benefit analysis.

The FSA will be talking to trade bodies, consumer organisations and other interested parties about what they think is working well (or less well) in the regimes, and this feedback will form a key part of the reviews.

Notes to editors

1. Clive Briault announced the mortgage review in Dec 04 - Speech by Clive Briault on 7 Dec 04
   
   and the general insurance review in Sept 05 - Speech by Clive Briault on 23 Sept 05

2. The mortgage and general insurance regimes were designed to deliver the following outcomes:

Mortgage Regime

• Consumers shop around for mortgages.
• Consumers understand whether they are being given advice or information by firms.
• Consumers take out suitable and good value mortgages.
• Consumers better understand the risks and features of the mortgages they take out, including the affordability risks.
• Consumers are treated fairly over the life of the mortgage, including when they go into arrears.

General Insurance Regime

• Consumers buying insurance on a non-advised basis receive sufficient information to make an informed decision, and firms selling the insurance do not make inappropriate sales.
• Consumers buying insurance on an advised basis are recommended suitable policies that meet their demands and needs.
• Consumers understand the key features of a policy, including significant exclusions, and the status of the service, before buying.
• Consumers claiming on their insurance policies have their claims dealt with promptly and fairly.

3. The FSA took on responsibility for mortgage regulation on 31 October 2004 and for general insurance regulation on 14 January 2005.
4. 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 for consumers; and fighting financial crime.
5. The FSA aims to promote efficient, orderly and fair markets, help retail consumers achieve a fair deal, and improve its business capability and effectiveness.