Broker snap: Goldman sees tough regulation in life insurance

30th Jan 2014 16:08

Investment bank Goldman Sachs expects life insurance regulators to be tough on the industry after meeting with officials from a UK financial watchdog.Goldman analysts who met the Financial Conduct Authority's Long-Term Savings & Pensions Director said in a note that they expected "ongoing regulatory headwinds in UK life insurance". It said the regulator's key areas of concern are product distribution, competition and prices and, as a result, Goldman prefers insurers with a good geographic and product mix such as Prudential and Old Mutual.It said the FCA believes the number of people shopping around for the best life insurance deal is inadequate, but accepts that encouraging savers to do so is difficult."We expect customer inertia and price disclosure to be central to the FCA's upcoming annuity market review," it said.Goldman said the regulator is concerned that insurers may not be ready to deal with the rising number of small employers automatically enrolling staff into workplace schemes and sees a risk that the government-backed National Employment Savings Trust (NEST) will be inundated in its role as "provider of last resort"."He also sees the need to consider a charging cap on default fund charges to avoid pensioners "sleep-walking" into a poor value scheme," the broker said.PW