FSA regulations are damaging car dealers, finds RMIF

‘The FSA (Financial Services Authority) insurance regulations could change the face of the motor insurance market as we know it, threatening motor retail business and restricting consumer choice,’ warned Matthew Carrington, chief executive of the Retail Motor Industry Federation (RMIF).

Carrington spoke as the RMIF published the results of a survey of motor retailers, which asked how the new regulations have affected their businesses.

‘The results of this research confirm the sector’s worst fears about the impact of the FSA regulations on the automotive insurance market,’ said Carrington.

The survey, conducted by the RMI’s Louise Wallis, found that the annual cost of compliance with the new regime is, on average, £4,600 per outlet, a sum which grossly outweighs the £1,000 worth of insurance sold by 20 per cent of dealers each year. The fact that three quarters of retailers make annual insurance sales of less than £20,000 further highlights the cost/benefit imbalance.

In addition:

89 per cent of dealers say the regulations have increased the time it takes to sell insurance
A quarter report a decline in income from insurance sales
53 per cent say the regulations have given little or no benefit in relation to the cost of compliance.

‘Our research suggests that many dealers are questioning the business sense of remaining in the insurance sales market,’ said Wallis.

She continued: ‘If nothing is done to ease the burden of compliance that exists under the current regime, we could see dealers leaving the insurance market in significant numbers. If this happens, those dealers could risk losing a certain amount of core business, as many consumers have come to expect to be able to purchase insurance at the same time as they buy their vehicle. This would also have a damaging effect on consumer choice.

‘The RMIF is not advocating wholesale change, but we do believe that a lot can be done within the existing framework to bring the scope of regulations into line with the size of the market. We will be using this research as evidence in our discussions with the FSA.’