The Association of British Insurers (ABI) has published guidance on the significance and potential implications of the Financial Conduct Authority’s (FCA) remit to promote effective competition and, from April 2015, enforce competition law under the Competition Act 1998. The guidance gives comments and recommendations to both the FCA and the insurance industry on the new regulatory objectives of the FCA and how these can be best achieved.
In summary, the ABI recommended:
- a joined up approach within the FCA to market analysis and interventions to avoid the burden of duplicate regulatory reviews;
- close coordination with the new Competition and Markets Authority (CMA) and Government departments;
- the provision of more information on how behavioural economics analysis will influence competition policy;
- caution when conducting profitability analysis and pricing interventions, citing uncertainty as to whether the FCA’s competition remit extends to regulating prices; and
- regulatory interventions grounded in analysis of one market should not be automatically applied to other markets.
The ABI was critical of the FCA’s recent report into “add-ons” in the general insurance sector (our previous post on this can be found here), so it is perhaps not surprising that it is now voicing wider concerns with the FCA’s competition remit.
The ABI also made a number of recommendations for the industry, in particular stressing the importance of proper engagement with the FCA to ensure that the FCA properly understands the markets it is investigating.
Click here to read the ABI’s full guidance note.