THE Director of Consumer Affairs, Mr William Fagan has launched a strongly worded attack on the insurance industry.
Insurance products are often overly complex and not properly marketed, Mr Fagan told an insurance industry seminar in Dublin. Speaking after the collapse of the Taylor Group, he also criticised the existing self regulation system in the insurance business and called for a single statutory body to regulate the entire financial services sector.
Although products and services are required under law to be in plain language there is still an "aura of complexity about them," according to Mr Fagan.
He said that the insurance industry had to "earn the respect of consumers". The old adage that insurance is sold and not bought no longer held true, he added.
Mr Fagan said that he believed that the insurance business could suffer a crisis of consumer confidence. Some industry sources had blamed this possible market frailty on the increasing sophistication of products but this might not be the whole answer, he added.
"Some of the blame lies in the way such products are marketed," the seminar heard. Strong statutory underpinning was needed to ensure there was proper control of marketing techniques, Mr Fagan added.
He said that recent events had shown the difficulty of self regulation in the area of insurance and investment. "Customers can no longer have confidence in a system whereby those who sell products and services are entrusted with regulating themselves."
He said his personal preference was for an overall regulator of financial services.
If self regulation is to continue, according to Mr Fagan, it needs to include a broader range of parties and include consumers. But even if such an expanded form of self regulation is introduced, some further "statutory underpinning" could be required. This could include regular unannounced inspections of accounts. "Everybody should be under threat that someone could come clattering to the door asking to see the books."
