What now for GISC? The self-regulatory body's failure to submit a rulebook to the OFT by March 1 was a crushing blow. According to its own timetable, GISC was due to "begin operations" in January this year but this schedule has now disintegrated.

At last week's board meeting GISC failed to set a timetable "for anything". The timetable will now be agreed the next time GISC's board convenes in March.

The delay to the timetable - and no one knows when GISC will start recruiting members - could prove critical. Even Chris Woodburn, GISC's chief executive, admitted as much when he addressed the Insurance Institute of London two weeks ago.

During an hour-long speech Woodburn told delegates: "If we don't get our act together very quickly, as an industry we are going to find ourselves sitting in a boat going down the river to the Docklands."

Clearly, if the industry is to avoid statutory FSA regulation GISC must be up and running fast. Those who support GISC, however, are confident the latest setback will have no profound effects, and that starting as a voluntary body does not present a serious problem.

Mike Slack, chairman of the AIIB (and GISC board member), claims that "everyone in the know" was well aware that GISC was walking a tightrope as far as

the OFT 'clearance' was concerned, and that the news has not been a surprise. "But," he argues, "the truth is we have to solve a problem that the Government has given us."

Making a thinly veiled criticism of GISC's bete noir, the IIB, Slack adds: "There is no other option. If you get down to the detail, the Government has made its mind up that GISC is what it wants. If everyone who is currently throwing bricks at GISC worked together, we would progress a lot more quickly."

A second reason why Slack does not regard the latest news as a major blow is because of the industry support that GISC has, he suggests, managed to generate.

"It's not a massive setback. We are going to get serious players joining straight away: Royal and Sun Alliance, CGU, Avon, Aon - massive market players. I would be delighted if my own company is the first to join and we will use it to promote ourselves."

The change to a voluntary organisation has also required a rapid reinvention of GISC's ethos. Having previously drummed the mantra of the mandatory, the new party-line for the regulator is that it is aiming to achieve a similar image to that of travel regulator Abta.

"Would you buy a holiday from somebody who was not an Abta member?" Slack asks. "Of course not."

But to create an Abta-style profile will cost money. Even the most optimistic GISC supporters would surely admit that "well-placed articles in hobby magazines" will not set the world on fire. And one of the most immediate problems engendered by GISC's switch to a voluntary body is cash. Having lost the right to a guaranteed income because of the switch, the question is, will GISC be able to generate the kind of funds necessary to keep going without making a second cash call?

Catherine Nicoll, head of communications at GISC, said she could not comment on the specifics of last week's board meeting. So, it is unknown whether a second cash call will be made. Such a move, however, would not be surprising.

These issues have left the GISC's detractors, most notably IIB director general Andrew Paddick and his army of supporters, claiming that the new regulator will have huge problems recruiting members. Paddick says: "If the people GISC is trying to attract wanted to be regulated, they would have joined the IBRC. The truth is the vast majority don't want to be regulated."

Paddick is also dismissive of GISC's plans to promote itself: "The regulatory body for the insurance industry is going to promote itself with articles in Fishing Week?"

Paddick believes the news that GISC will not start life as a mandatory body is a huge blow. He says: "Cracks are showing in GISC. My own view is that this isn't the end of the beginning. It's the beginning of the end."

But the issue really depends upon the people who actually sell general insurance across the UK: the brokers, the intermediaries, the retailers.

GISC is believed to be reviewing a significant amount of its second consultation document. It will only become clear just how attractive membership will be once details have been released.

Paddick believes that recruiting members will be devilishly difficult for GISC. Much will depend on what GISC finally decides the PI levels, the membership fees, and the training requirements for voluntary members should be. These will now need to be pitched attractively in order to bring in members.

But what do the the brokers and intermediaries, the companies who will be most affected by this change, think? The early indicators of an Insurance Times reader-survey suggest that a slight majority will not join GISC as a voluntary body.

One intermediary said: "Who would want the GISC regulating you as well as the ABI, Biba or IBRC? We sell insurance. We cannot spend all year being inspected by different bodies!"

Another said: "No, but we will probably willingly join once things are clearer. We are happy that the compulsory deadline has been put back."

But there is still very strong support for GISC. Another respondent said: "If the brokers don't make GISC work, they'll get the FSA doing the regulation direct. Any broker who wonders what that's like should ask his insurers. Make GISC work."

As far as Lloyd's is concerned, the 300-year-old market's brokers are likely to sign up to GISC as soon as they can. It will be far cheaper to be regulated by GISC than by Lloyd's, and Lloyd's will encourage them to join.

A Lloyd's spokesman said this week: "The latest change in GISC thinking is not causing any problems here. It's likely that, if necessary, we would tell our brokers that if they wished to remain Lloyd's brokers, then they would have to join GISC."

A key factor for GISC now is to create a regulatory body that meets forthcoming European legislation.

Paddick says the forthcoming legislation - which could take several years to hit the UK - recommends statutory regulation. If he is right, then that would spell the end of the GISC.

But Tony Baker, current deputy director general of the ABI, has a different take. He said: "My understanding is that the European legislation will allow suitable self-regulation as an alternative to statutory regulation - and the GISC would be a suitable alternative. If the Government is assured regulation is being achieved through a self-regulatory regime, then there will not be a problem."

Retracing the mess: the history of the GISC
The planned repeal of the Insurance Brokers (Registration) Act IBRA was announced on July 27, 1998.

After a period of consultation Helen Liddell, the then economic secretary to the Treasury said: "[The Government] has reaffirmed my view that a case for continuing statutory regulation of insurance brokers has not been made. Useful though it has been in the past, it no longer fully meets the needs of today's market."

This statement created two warring factions: those who believed the best way forward was a self-regulatory body, and those who thought the IBRC should be given greater powers.

The GISC got on with creating a body that would meet Liddell's proclamations, the IIB, took over the administration of the IBRC and recommends that the IBRC should simply have its powers extended.

With the GISC's latest decision, the future of IBRC members is uncertain. Andrew Paddick has said that should the IBRA be repealed before the GISC is a mandatory body, he will promote the IBRC as a regulatory body in its own right - something it would legally be able to do.

Unclear future for ABI-coders
What happens to the 3,750 ABI-monitored intermediaries is unclear. The ABI was to hand them over as a group to the GISC as soon as the rulebook was in place. Now, the switch from the old regime to the new is more complicated.

ABI intermediaries will be within their rights to refuse to join the GISC while it is still in its voluntary phase. And if they don't join, but some others do, then the ABI will still have to perform monitoring duties on the remaining intermediaries.

"That situation could present a difficulty," said ABI deputy director general Tony Baker. "We don't want to have two regimes running alongside each other for several months."

It's unlikely to be just several months. Even if it proves supportive, The OFT could take 18 months to give the green light to a mandatory regime.

If none of the ABI-coders switch regimes, the GISC will lose over £1 million annual income. Little wonder it admits it may have to make a fresh call from its original backers, major insurers and brokers and Biba.

The ABI's finances will also suffer as it will have to keep paying the PricewaterhouseCoopers monitoring team under Roy Stibbard on an ad hoc basis.

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