The FSA has shelved plans for small businesses to be classified as private customers.
According to its latest consultation paper, CP187, the FSA said it plans to classify small businesses as commercial customers, and not private customers.
The new policy should see brokers facing less onerous requirements than previously feared.
Insurers had feared they would be hit with a one-off cost of £50m if the FSA had proposed to treat small businesses as private customers.
Brokers were fearful of the original plan because they would have been required to supply policy documentation to potential clients before they commit to buying a policy.
In their joint response to the FSA's original paper on general insurance regulation, CP160, Biba and the London Market Insurance Brokers' Committee said: "It is illogical to...apply a level of statutory protection at a similar level to the unsophisticated private policyholder."
Chief among the other proposals was a requirement for all firms to disclose significant exclusions to their customers. For example, medical insurance customers must be told up-front what medical conditions and types of illness will be excluded from a policy.
The FSA paper also proposed that there should be no
commission disclosure rules when an intermediary is dealing with retail customers. When an intermediary is dealing with a commercial customer the FSA proposed that the intermediary must disclose its commission.
The proposal also included more detailed requirements for insurers dealing with claims from retail customers compared to claims from commercial customers.
Sarah Wilson, director of high street firms at the FSA said: "Our aim has been to develop a regulatory regime that reflects the distinctive risks in general insurance, and introduces measures to protect consumers only where necessary in this diverse market. The feedback from our previous consultation has been valuable in helping us achieve this.
"Most of our rules, and the associated costs, are driven by European Directives. In very limited areas, such as product disclosure, we could see strong reasons for going beyond the Directives on consumer protection grounds.
"For example, our proposals will ensure that consumers get key information about the main features in a policy."
For more detailed information on the proposals, visit the FSA website by clicking here .
