Biba will suggest new definitions of private and commercial customers to the FSA, as experts claim the current definitions will result in "huge red tape".
The FSA's CP 160 consultation paper on the sale of general insurance suggested including businesses with a turnover of less than £1m in the definition of private clients.
Insurance consultant Tony Cornell said it would be a significant burden for brokers to treat "about 90% of UK business" as if they were individual consumers.
He said it would force brokers to carry out a fair analysis and produce demands and needs statements and disclosure documents for all such business. "This is a huge amount of red tape and there is nothing in the document to justify such a burden or suggest that the sector has not been well served in the past" he said.
He warned some large brokers and a huge amount of small brokers could withdraw from the sector as a result.
Biba chief executive Mike Williams agreed it was a complex issue with no single correct answer.
"We're consulting with the whole of the Biba membership and will put forward our own proposals, including alternative definitions of private and commercial customers," he said.
Williams said it was unlikely large brokers would withdraw from the sector, but it could force some small brokers out.
"There's a real danger that some brokers will see the proposals as the last straw, forcing them to withdraw from the sector, apply additional charges or work on an execution-only basis," he said.
"Each of these alternatives clearly risks `consumer detriment', ironically the one thing the FSA is determined to minimalise."
The author, Deloitte & Touche insurance practice manager William McDonnell, said it would be a useful tool for insurers undertaking risk analyses, as the FSA did not provide a framework to follow.