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GISC accused of inequity in its insurance selling rules

Businesses selling insurance products are being advised that it is 'business as usual' in the light of the decision by the Competition Commission that new sales rules proposed by the General Insurance Standards Council were anti-competitive.

The GISC had hoped to introduce a rule (Rule F42) that required all its members to only do business with other members or their intermediaries.

Retail Motor Industry Federation (RMI) legal advisor, Tim Ensor-Clinch, said: “Since Rule F42 has been ruled to contravene the Competition Act 1998, the whole GISC regime seems to have been thrown into confusion. Until we receive some clarification from GISC we will be advising any RMI members that, if they so choose, there is no need for them to proceed with their applications for GISC membership and it is business as usual. Of course any businesses whose applications are well advanced may well be advised to proceed with their application.”

He said he now hoped the GISC will recognise the “inequity” of parts of its rulebook especially for small businesses for who insurance sales are not their core business. The Competition Commission's judgment on Rule F42 states: “In practice the GISC Rules can only be brought into force by means of a collective boycott or refusal to deal on the part of all or most of the major insurance companies in the UK.

“The only way for the GISC regime to work is for unwilling intermediaries to be effectively coerced into membership by a collective refusal to deal by insurers, accompanied, in some cases, by the threat that the insurer will deal directly with the intermediary's client if the intermediary does not join GISC.

“In our view, a collective boycott or refusal to supply, such as is required by Rule F42, undertaken by the vast majority of insurance companies in the UK in respect of up to 10,000 intermediaries, in itself amounts to an appreciable restriction or distortion of competition with the Act.”

The Competition Commission's inquiry came following claims from the travel agents' association ABTA and the Institute of Insurance Brokers that Rule F42 would stifle competition.

The rules were originally due to be fully implemented by 1 September, but were postponed until 15 October and then put back until 31 December.

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