The General Insurance Standards Council is again making news for all the wrong reasons. Considering the division that already exists in the broker community about whether to join the fledgling regulator, the GISC has shown, at the very least, a lack of guile by implementing a rule relating to premium finance deals that will cause massive disruption to current practices.
Currently 90% of premium finance arrangements are recourse, i.e. the broker, rather than the premium finance house, is liable for bad debts if a policyholder fails to pay. The GISC's rulebook will encourage the broker market to switch this arrangement around. In effect, it will encourage smaller brokers without vast funds to have non-recourse deals in place. The merits of this rule are not in question, nor the protection that it will afford the consumer. But the timing and inclusion of the rule at this early stage of the GISC appears cack-handed.
This is a body that has bleated that brokers either accept its raison d'etre of ‘sole regulator' or face the greater powers of the Financial Services Authority. So why is the GISC potentially disrupting the working practices of smaller brokers, the very group that now has an option to join an alternative regulator, run by the trade body they know and trust, the IIB. The rule will bring protection for the consumer but the price may be the loss of some small broker members.It seems not a week goes by without more problems emerging from its rulebook.