I thank the Chairman and other members of the committee for this opportunity to address them about their work in the area of insurance. First, I will inform members about our role and responsibilities, then I will detail how solvency requirements protect consumers and summarise progress in our work in regard to the committee's interim report recommendations.
I will start by briefly putting the role of the Financial Services Regulator in context by describing our statutory mandate. Our job is to protect consumers. We do this by helping them to make informed decisions in a safe and fair market; and by fostering sound, dynamic, financial institutions which, in the case of insurance companies, provide a fundamental safeguard for policyholders and potential claimants. Both of these responsibilities are clearly linked - the consumer is at the very heart of what we do. A significant sub-set of consumers of general insurance products is small and medium-sized businesses.
Since our establishment only a year ago we have been working to assist consumers in making their own financial decisions by providing them with clear and relevant information, by monitoring competition and by developing and enforcing industry codes of practice. We protect the funds, investment and policies of consumers through having a regulatory system that fosters safe and sound financial institutions while operating in a competitive market of high reputation. The setting of solvency requirements is central to this latter work.
When it comes to general insurance, we can identify two categories of consumer, the policyholder and the claimant. It is essential that insurance companies have sufficient funds so that policyholders know that they are covered to meet claims. It is equally essential that insurance companies have sufficient funds to meet these claims. This is what solvency requirements are all about - protection for consumers - and I will go into this in a little more detail later.
My colleague, Mary O'Dea, consumer director of the Financial Services Regulatory, appeared before this committee last November. Members may be interested in some of the relevant developments that have taken place since then. We issued an interim code of practice towards the end of last year to all insurance undertakings. This applies the same basic standards of consumer protection to insurance companies as apply to insurance brokers. We are currently undertaking a consultation process as part of our review of all conduct of business rules for financial services providers. This is to ensure the same level of protection for consumers, regardless of the type of financial services provider or product they choose, and to facilitate competition by providing a level playing field.
We have published two independent motor insurance cost surveys. These have clearly highlighted to consumers the considerable savings that can be made by shopping around, either directly or through the broker network. In some cases we have shown savings as high as 50%. We believe that this type of hard and fast information - easily accessible and understandable - plays a key role in informing consumers. It is only an element of the much larger programme of insurance reform initiated by the Tánaiste, in which we play our part along with others. We will continue to conduct and publish the motor insurance survey every three months, in addition to various independent cost surveys in other areas of financial services that we are undertaking.
We have commenced a review of free and commission structures and transparency in the intermediary sector. We want to make sure that any commissions are structured in such a way that products are sold appropriately and that the incentive structure works in favour of consumers.
Tomorrow we are to publish a public consultation paper on mandatory competency requirements for those who provide advice on or who sell retail financial products. As part of our consumer protection policy, we are committed to setting specific industry standards in regard to the competency and skills of financial services providers who deal with consumers. The proposed industry categories include those involved in general insurance, life assurance, investments, mortgage lending and consumer credit businesses.
Perhaps the most significant development, however, has been the publication in January of our three year strategic plan, which is a rolling one. This sets out our seven high level goals and associated strategies that have been identified for the Financial Services Regulator to achieve during the lifetime of the plan. These cover our main areas of activity - conduct of business rules, consumer information and safety and soundness of institutions. This is in addition to our role in regulating credit unions.
These goals cover not just our core regulatory business but also relate to building an efficient, effective and professional organisation. We have already commenced a number of best practice reviews as to how we do our job and we believe that the outcome of these reviews will give rise to greater efficiencies in the regulatory process. We are examining, among others, the processes of regulators in Australia, Canada, Denmark, Hong Kong, the Netherlands, Norway, Sweden and the UK with a view to applying best practice.
In terms of the regulatory environment, our strategic plan demonstrates that we are committed to a principles based approach to regulation. This can be best achieved through the boards and top management of financial firms committing fully to a culture of integrity, competence and best practice. In turn we expect them to ensure that this culture flows throughout their organisations. Our aim is to have a regulatory system that engenders an ethical and competent industry with appropriate risk systems in place.
