Dealers are being warned against joining the General Insurance Standards Council by the RMI after an announcement that the Financial Services Authority is likely to be given sole responsibility for regulating the selling of general insurance.
The RMI's legal advisor Tim Ensor-Clinch said: “While industry self-regulation is preferable it is now likely that statutory regulation will be introduced. This means because it is now conceivable that the FSA will now become solely responsible for regulating any business that sells general insurance, membership of GISC will cease to be an obligatory requirement.
“Although GISC is being urged to continue as a voluntary body it is doubtful that it will be able to effectively operate as many organizations are now unlikely to join.”
The FSA, says Mr Ensor-Clinch, is the likely candidate to become the regulator following the introduction of new European Union rules requiring businesses that sell insurance to be regulated by a statutory body.
Under EU rules GISC, as a voluntary regulator, does not presently qualify as a statutory body.
The FSA has admitted it would have to devise regulations from scratch. John Tiner, FSA head of insurance regulation, has said: “If the Government decides we are to take over regulation of general insurance sales, we would have to design a regime as we have not done anything on this yet.”
On the subject of the new regulations, Mr Ensor-Clinch said: “It would helpful when the new regime is being drafted if consideration could be given to the GISC rulebook which many industry sectors have invested a great deal of effort in finalising. It would be disappointing if all concerned had to start from scratch again.”
The Government's announcement regarding the role of the FSA is another blow to the GISC. Earlier in the year its plan to insist that all its members only do business with other members and their intermediaries was rejected as anti-competitive by the Competition Commission. (December 17, 2001)