Brokers remain concerned about the proposal to extend the Financial Ombudsman Service (FOS) to cover intermediation following the release of the FSA's latest consultation paper, CP187: Insurance selling and administration.

CP187 follows on from CP160. The manager of retail general insurance policy at the FSA, Andrea Konrath said that most responses to CP160 supported extending the FOS.

But brokers are concerned that the FOS will be overrun with frivolous or malicious complaints that would be costly to resolve. according to Biba chief executive Mike Williams. "The jury is still out on the cost to brokers of the ombudsman service," he said.

Konrath said concerns about the fee structure would be addressed through consultation on FOS scheme fees, to be done at the end of the year.

In a victory for brokers, the FSA has backed down on its proposal to classify small businesses with turnover of less than £1m as private customers, instead opting for the traditional retail/commercial split.

FSA director of high street firms Sarah Wilson said this was due to feedback about the cost and difficulty of implementing and administering the proposal.

The FSA has also scrapped its proposal to classify critical illness cover, private medical insurance and income protection cover as high risk, a move which has been welcomed by the ABI.

"The recognition that it probably doesn't make sense to have a separate high risk category is a good thing," said ABI head of general insurance, John Parker. Biba also welcomed the changes with regards to customer classification and high-risk products.

Following on from the recent Office of Fair Trading recommendation, the FSA is asking brokers if it should regulate for 21-day renewal notice periods for commercial policies. The alternative proposal, an "in good time" rule, would result in variable notification periods for different commercial products and different customers.

Wilson said that most of the high-level principles contained within CP187 are final, but the rules relating to implementation of the high-level principles were open to change, based on the feedback.

Williams urged brokers to respond. "Brokers shouldn't ignore this. It will have a direct impact on the way that they trade going forward." Responses to CP 187 are due by 30 September, and final rules will be published in January 2004.