The Financial Services Commission (FSC) – the government agency that regulates non-bank entities insurance, pension funds, and securities – is in the process of making important changes in the way it supervises the insurance sector.
It is switching from solvency supervision to market-conduct supervision.
Solvency regulation ensures, among other things, that companies have a minimum amount of capital to meet their liabilities. The aim is to prevent them from suddenly going bust and creating problems for consumers and the financial system.
Market-conduct regulation places emphasis on how companies operate. The focus is on outcomes. Its premise is that “customers’ best interests are at the heart of everything” insurers and other participants, like agents and brokers, do.
The FSC is to the companies it supervises what the Bank of Jamaica is to banks and credit unions. The FSC performs similar functions to what the Offices of Utilities Regulation does in relation to water, electricity, telephone, and broadband service providers.
Three things signal the about-turn in how the FSC will operate in the future: recent leadership and top management changes; regular exchanges between that agency’s employees and the public that are not limited to the handling of complaints; and public consultations about the nature of the guidelines that should apply to the $75 billion industry.
The latter two have the potential to improve public perceptions about the commission; promote better understanding about the products and services that insurers offer; raise consumers’ expectations about the quality of service the industry delivers – even if some companies will have to be dragged kicking and screaming into the 21st century; and help to reduce some of the biases and suspicions that some persons have about the industry.
This column first appeared in 1997. It has a longer history than the FSC.
The FSC was formed to replace the Office of the Superintendent of Insurance, which was a division of the Ministry of Finance. The commission was the subject of many articles. None of them was positive. For example, between March 21, 2010, and December 17, 2017, there were 20 articles where negative inferences could be drawn.
This column is taking no credit for influencing changes in regulatory thinking. Instead, it applauds the commission’s decision to alter the original guidelines and align them with current regulatory best practices.
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