The 44-page report on general insurance regulation is one of the most important documents to hit the industry in years. Below are the key sections
Chief executive Chris Woodburn has said fees are the most sensitive and difficult issue the board has had to tackle.
Part of the problem has been the lack of financial information on the 30,000 potential members.
For the Fee Year 2000, intermediaries will have to pay 0.1% of commission and fees income while insurers will have to pay 0.025% of net premium income. There is a minimum fee of £300 and a maximum fee of £100,000.
Intermediaries will be facing payment for regulation for the first time. Lloyd's brokers will find themselves paying far less than currently.
Members, other than those authorised by the FSA or other regulatory body recognised by the GISC, must maintain a margin of solvency at all times.
The margin will be the excess of current assets over liabilities as determined by UK standards of accounting practice.
It is equivalent to the uninsured excess under any Professional Indemnity cover and subject to a minimum of £5,000.
Higher solvency requirements may be required for firms dealing with Lloyd's.
The minimum limit of a year's professional indemnity cover is £1m and four times net retained brokerage and fees in report of all classes of general insurance business. But in no case shall the minimum level of indemnity be required to exceed £10m.
The uninsured excess in respect of each claim must not exceed one per cent of the minimum limit of indemnity.
The excess may be increased above 1one per cent provided that the solvency margin is maintained.
Client segregation of money
Intermediaries will not be allowed to mix insurance money (i.e. money which is either received from a customer for onward payment to an insurer, or received from an insurer for payment to the customer) with their own money.
They will be required to an insurance bank account – not accessible to their general creditors in the event of their insolvency.
The nature and extent of training required will vary depending on what the firm sells. Basically, it seems everybody who sells general insurance will require some form of continual professional development – at least 12 hours every year.
Insurance "grandfathers", ( those with suitable experience) will be exempt from the testing or qualification requirements, but will still need the 12 hours graft of CPD every year.
Disclosure of remuneration
Members must disclose all fees or charges (not commission) they propose to charge the customer which will be in addition to the insurance premium. This includes clawback commission.
But a consumer can demand to know the level of commission charged or other remuneration, such as over-riders, they receive as a result of effecting insurance for that customer.
There are a range of penalties which the GISC intends to use. The ultimate is expulsion from the GISC and cancellation of all agencies. Errant firms may also face the stocks, or public censure.
Members must acknowledge a letter of complaint within 14 days of receiving it. Letters of response must inform the complainant what they should do if they are unhappy with the action. All members must have a system of recording and monitoring complaints.
Several firms have tendered to act as monitors for the GISC. Members can expect a site visit at least once every four years but may be more frequent if required.
The report in full can be found at: www.gisc.co.uk
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A problem at the printers caused the delay in sending out the GISC consultation documents, explained head of policy Angela Darling.
There was a small batch of early copies sent to Glasgow which were missing some pages. The discovery caused a small panic. A complete run of 30,000 copies are now being hand checked to ensure they are correct.
Like most people, IIB leader Andrew Paddick was struggling to get hold of the GISC report this week. He was not sent a complimentary copy, and attempts to access the GISC web site failed time after time.
Nevertheless, he told Insurance Times on Tuesday, he was broadly satisfied by the solvency requirements and the fee arrangements. However, he noted that larger brokers would be paying much more. And he asked: "It all seems very similar to the IBRC – so why was it shut down?"
The previous week, at the London leg of the IIB's five roadshows, a majority of the 200 members present showed support for the IIB keeping its distinct professional and regulatory identity.
Paddick said: "We want to preserve the situation of insurance brokers as a stand alone body of professionals. We do not want to share an identity with 30 to 40,000 insurance agents or 'peddlers of insurance'."
Paddick said intense pressure was being applied to brokers to join the General Insurance Standards Council by its supporters.
"It's called, if you don't join our scheme, we will cancel your agency agreements," he said.
But he told members the IIB would not give in to "hooligan tactics".
Timetable for GISC lift-off
|From||Type of distributor||Approx. No.|
|Feb 2000|| Insurers - major direct sellers |
Insurers - others with direct operations
Current ABI-monitored intermediaries
Lloyd's brokers, syndicate direct sellers and service companies.
| 60 |
|Jun 2000||Travel Agents||2,700|
|Oct 2000||Other non registered intermediaries - first phase*||4,000|
|Year 2000 target: 11,035|
|Jan 2001|| IBRC registrants |
| 3,000 |
|May 2001||Other non registered intermediaries - second phase*||8,000|
|Year 2001 target: 19,500|
| Total potential regulated community: 30,535 |
* These may include vets, estate agents and dentists, for example