Brokers are concerned that rules for dealing with customer complaints outlined in this week's FSA consultation paper could be too onerous.

The long-awaited document on the sale of general insurance says that complaints about intermediaries should be dealt with by the Financial Ombudsman Service (FOS).

Biba chief executive Mike Williams said it was unrealistic to expect intermediaries to afford the £700 per investigation charge levied against insurers by the FOS.

"They need to take a long, hard look at the funding of the FOS going forward," he said.

An insurance company broker relations manager said the FSA should have its own process for investigating consumer complaints against brokers.

"Bringing the ombudsman in up front like this isn't a good idea," he said. "He should be the last resort."

One broker claimed that the proposals could see an end to independent brokers. "The proposal says that you can work for the whole market or for a panel of insurers."

He said it was impossible to work for the whole market. The alternative qualification for this is a fully researched panel, which could be a huge amount of work.

One of the most contentious issues - the regulation of travel insurance and extended warranty sales - has been avoided until the government and the Competition Commission have finalised their respective dealings with the industries.

The FSA has proposed that intermediaries need not disclose their commission to "private customers" but must, on request, disclose any commission and fee to "non-private customers".

It defines non-private customers as entities such as local authorities, Lloyd's Names and businesses with a turnover of more than £1m.

Layton Blackham chief executive Chris Blackham said: "The paper gives the opportunity for a balanced and considered debate that could result in consumer protection without the confusion of total disclosure."

The FSA has proposed the prevention of unfair inducements and excessive that may conflict with the broker's duty to private customers.

However, Williams pointed out that it would be difficult to define what was "unfair" and "excessive".

Health insurers have welcomed the FSA proposal that intermediaries pass an exam to be authorised to sell medical products.

  • The industry has until March to respond. The document can be accessed at

    Key points

  • Commission disclosure: may not be necessary to disclose intermediaries' commission to personal lines and SME customers.

  • Travel insurance: while the government is currently consulting on three options for the regulation of travel insurance sales, the FSA will not address the issue.

  • Extended warranties: while the Competition Commission investigates extended warranty sales, the government has deferred making a decision on their regulation. The FSA will not address this issue until the government acts.

  • High-risk activities: the FSA has identified long-term care, income protection, critical illness and private medical insurance sales as posing a higher risk to consumers . Intermediaries selling these products may have to take an exam.

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