Regulation  

Five key themes from this week’s news

Once again this has been a busy week, but this time it was thanks to the regulator and not George Osborne.

Here are the five key news themes which emerged this week:

1) FCA committed market manipulation.

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No one came out unscathed from the Davis Review, least of all the FCA. Conducted by Simon Davis of Clifford Chance, into the handling of an announcement regarding a review of the life insurance industry, the 200-odd page report contained some startling revelations, including that Clive Adamson did not even conduct the interview with the Telegraph.

The regulator’s supervision department realised there were sensitive issues for life insurers, therefore there was a “risk” that the contents of the review was ‘price-sensitive’, however, the issue of price-sensitive information was not addressed when pre-briefings were given.

According to law firm CMS, a bank or insurer that did this with price-sensitive information would be fined millions and its chief executive would be fired. Not the FCA though, which just highlights how unaccountable the organisation is.

Simon Morris, partner at CMS, said that while the FCA assured the industry in its response that lessons have been learned, the board and chief executive escaped scot-free (although they did lose some of their bonus).

He said: “No real censure there.” I couldn’t agree more.

2) Pension papers raise more questions.

Perhaps attempting to bury bad news, the regulator published two papers on Wednesday; its annuity review and retirement income market study. The former did not find wide-spread mis-selling of annuities, but did order firms to carry out further work. It was also clear that shopping around does not work, as people do not understand where to go and some providers were not clear about this.

In the other paper, the FCA said it will be working with the government to develop an alternative to the current, lengthy wake-up pack.

It also proposed a new ‘pensions dashboard’. While this was welcomed by the industry, law firm Eversheds questioned who was going to be building it. Will there be further costs for the industry for this?

The FCA is also consulting on replacing the Association of British Insurers’ rules with its own. The ABI said this was pleasing, as it wanted the code to be developed into rules that will apply across the entire pensions market.

3) Regulator expects business model innovation

The FCA also predicted innovation in business models as well as products. It expects to see an increase in direct to consumer business models, particularly by insurers. These will probably involve interaction with potential customers in the run up to, and throughout the retirement journey, with a significant digital/online element to them.

It expects firms to develop a “more holistic” digital proposition for consumers going forward, “in an attempt to digitise the wider pension lifecycle and customer journey towards, at and through retirement”.