Survey Reveals Divide Over Who Bares Cost of Compliance in Insurance Industry

A State Street survey of 176 U.K.-based Financial Advisers (IFAs) has revealed that 80% believe the increased insurance industry regulation will be passed onto policyholders.

The July research contrasts with the publication in April of the costs to the insurance industry of complying with regulation such as Solvency II.

The April survey revealed that 30% of global insurance executives said the increased cost of insurance industry regulation would be passed to policyholders. However, on the issue of whether regulatory regimes will converge to a global standard, there is consensus between the two groups with 39% of insurance executives agreeing with this trend compared to 41% of IFAs.

Martha Whitman, senior vice president and head of State Street’s insurance team in Europe Middle East and Africa (EMEA) said, “The insurance sector is very reliant on intermediaries. As consumers increasingly need more help with their finances, the role of IFAs in the distribution of insurance products will remain pivotal.”

In relation to the regulatory environment, 41% of IFAs expect regimes to converge to a global standard over the next five years, compared to 29% who claim they will not be harmonized and diverse national standards will continue to exist. Eight out of ten IFAs interviewed also believe that the cost of increased insurance industry regulation will be passed on to policyholders.

The survey also reveals that 87% of IFAs believe it is likely there will be more mergers and acquisitions (M&A) within the insurance sector over the next five years. Only 8% expect there will be less M&A activity.

The IFAs interviewed also expect to see more product innovation from the insurance sector over the next five years. Some 51% anticipate more activity here, whilst only 13% expect a decline. More than 70% believe most innovation will take place in post-retirement products, with just 24% anticipating more in the pre-retirement product market.