The final draft of the Isle of Man Conduct of Business Code published in May outlined requirements for international insurance companies headquartered there to tell customers how much commission they would have to pay to intermediaries over the life of the product, but only after the sales process has been concluded.
Gary Robinson asked a number of relevant players for a preview of their companies’ responses ahead of the Isle of Man Financial Services Authority (IOMFSA)’s deadline for general feedback to the latest draft.
In light of the draft, the first question asked was: What are your thoughts generally on the Isle of Man Conduct of Business changes?
David Kneeshaw, chief executive, RL360°, said: We are very supportive of the general principles, which place consumer protection and greater transparency at their very centre.
Mike Foy, chief executive, Utmost Wealth Solutions, said: The proposals from the Isle of Man FSA are in line with the direction of travel of global regulation and not dissimilar to the regulatory position, actual or proposed, in most major markets.
Indeed, discussions between the FSA and the Insurance Authority in Dubai highlight the inevitable convergence of conduct of business across major markets. Overall we support any movement towards greater product transparency and better customer outcomes.
Peter Kenny, managing director, Old Mutual International, said: Generally we absolutely embrace it. Better transparency will enable the customers to make the right decision.
I came to Old Mutual from the board of the regulators (Kenny joined OMI from the IOMFSA on 1 August last year). I was part of the board, so I have an understanding of the process.”
How will the proposed changes impact a) on your business and b) on the industry in general?
DK: We are still waiting for the detailed rules to be agreed but… I think it will lead to life companies reviewing their product range. It will also put more onus on [them] to demonstrate due diligence of the adviser firms who sell their products.
I believe that the larger and forward-thinking adviser firms will thrive in the new world.
MF: There will be little impact on our business as we only promote our products in to the UK, which already has robust COB rules.
Where we support partners’ business in other jurisdictions, e.g. Hong Kong, regulation is already in place not dissimilar to that proposed. Full cross-border providers will likely be impacted most but, given time, the industry has an ability to deal with changes such as this and absorb them.
PK: One of the things that attracted me to Old Mutual International was that they are a company that were already going in this direction. Generally, the adviser landscape is changing and we are seeing more advisers embrace this change and begin transitioning their business model. ”
Is there a threat of ‘over regulation’ in the industry generally and internationally and if so why is it necessary?
DK: Broadly the industry regulation is designed to have similar outcomes of greater transparency and better customer experiences. The challenge is how to deal with conflict and overlap between regulations that apply in the country where a product is ‘manufactured’ and the jurisdictions where that product is distributed.
MF: High commission, poor value products and opaque sales processes will always grab attention, and rightly so. Our role has to be to work with regulators to help create a global financial services industry where products meet customers’ needs and customers are better informed, but are then free to act on the advice they receive.
PK: It is reassuring that confidence levels are high across the international regions and advisers believe they are ready, or will be ready, for the new regulations. Knowledge levels should rise once the final rules are announced by the IOMFSA and we will certainly be supporting advisers across all our regions.
What feedback, if any have each of the companies given to the regulator on the matter?
DK: Like many of the Isle of Man based life companies we have had direct discussions with the regulator about the proposals, as well as contributing to feedback through industry bodies like the Manx Insurance Authority (MIA).
While I won’t comment on the specifics of those conversations, we have told them we are broadly supportive of what they are aiming to achieve.”
MF: Our input to the regulator has been to encourage parity and consistency with regulation in other major markets such that Isle of Man providers do not find themselves at an obvious competitive disadvantage, nor do they have to operate a multiplicity of distinct compliance regimes market by market.
PK: Without question, our response to the regulator has been extremely supportive. We firmly believe these changes will strengthen the offshore market and improve the customer outcomes. Timescales are getting tight now as we still don’t have the final regulation.
Is the proposed regulation a game-changer for the industry or just another piece in the ongoing regulatory jigsaw?
DK: I see this as another piece of the jigsaw. However, the Conductn of Business changes do have the potential to be the catalyst for IFAs to review what sort of business model they want to operate in the future. I’m finding that the larger adviser firms are already well advanced in their thinking on this.
MF: Global regulation is only moving in one direction and this is a further step on a common global path. The bigger question is what impact it may have on the global financial advice market and whether it will generate
the upheaval that the Retail Distribution Review did in the UK.
PK: The Isle of Man regulator has a good principles-based approach. We have regular meetings and a strong dialogue. Having such discussions leads to less enforcement. ■