What does this mean, and how will investors benefit?

Why do we need better regulation?

Confidence in the insurance industry has been dented over the last few years, due to mis-selling of personal pensions, as well as the Equitable Life and Independent Insurance debacles.

These issues have raised questions about the way insurance companies are managed, and how to improve the methods by which they are kept in check by the regulator.

Why is it important?

The life insurance industry accounts for about 20% of shareholdings in the UK industry.

Millions of ordinary people put their faith in its financial wellbeing, through payments into savings plans, endowments and pensions.

FSA's aims

More pressure on the quality of an insurer's management, system and controls Adequate resources - improve solvency requirements Improving public and regulatory reporting More proactive approach to regulation, rather than "desk based analysis of financial returns Clearer explanations for consumers

Increased life expectancy, and a growing dependence on private pension provision will put a bigger spotlight on the insurance industry in the future.

An increasing number of people will have to rely on the sector to provide for their old age in the face of dwindling state provision and company pension schemes.

Better information for consumers?

The FSA wants to improve the information available to consumers, make products more transparent and the industry simpler to understand.

It has already started work on some areas, such as offering comparative tables, and launched "jargon busting" exercises, aimed at making products simpler to understand.

But what about the company's wellbeing?

A major issue relates to insurance company accounts, which are difficult to read and understand.

There will be a series of reforms, both in the UK and internationally, which should make accounts more transparent.

Some of these changes may not be completed until 2005.

What's the FSA doing now?

The FSA's approach to regulation is risk-based, and it is currently focusing its attention on the health of the biggest 200 insurance firms.

In other words, this is broadly a free market system, with a series of checks and sanctions in place to regulate it.

Under the new regime, the FSA will put more pressure on the management of companies to act responsibly and ensure the firm has adequate financial resources to manage its risks.

The FSA has always had powers to impose sanctions on directors, including barring directors from working in firms it regulates.

But it is likely to be less reticent at using these powers in the future.

What about the current health of insurance companies?

Over the last 12 months, the FTSE-100, which contains many of the biggest household names, has fallen by 21%.

In response, an increasing number of insurance companies have increased their exit penalties and cut bonus rates to try and maintain their financial wellbeing.

Investors are being urged to check their policies for any shortfalls.

The FSA also announced on Tuesday that it was considering how to give consumers more information about potential problems with firms.

The regulator's hands are tied to a certain extent by legal constraints about what it can disclose about a firm.

It is also concerned that it could make a company's situation worse by highlighting the problem.