Broker and consumer representatives have slammed the interim complaints procedure unveiled by GISC this week because it will not have adequate resources to carry out investigations properly.

GISC has only three months to put in place a proper complaints system for insurance consumers before it begins to admit members from

July 3, 2000. This is more than six months behind the GISC's initial schedule to begin regulating in January 2000.

The voluntary regulator for the insurance industry has bowed to pressure by making significant changes to its rulebook, which is set to be published in May, almost a year behind schedule. It received more than 300 submissions to its consultation last December.

Anthony Howland Jackson, chairman of GISC, said: "We have looked very carefully at our behavioural standards. These are now entirely consumer-orientated and the rulebook will be more akin to banking and mortgage codes, as our business will be consumer

He also said GISC aims to slash its fee for its smallest potential members from £300 to £200. This will apply to brokers with a commission fee income below £200,000.

Above this level brokers will face a maximum fee equal to 0.1% of their commission or fee income.

Instead of a phased joining programme, GISC has decided to throw open its doors to all eligible member groups, from Lloyd's brokers to insurance intermediaries, from day one of its launch on July 3. It said it expected 1,000 firms to sign up immediately.

And, GISC has modified its requirement that intermediaries keep insurance money in a separate account. It is now insisting this rule will apply only to intermediaries whose main business is insurance. The GISC is also offering to set up an interim complaints system until a Financial Services Authority scheme gets up and running.

A GISC spokeswoman said: "Until we can get clearer indication from the FSA, we are offering to set up an interim complaints arrangement. This is because we recognised it would not be credible to have no system at all."

GISC has won approval for its plans from the Government.

Melanie Johnson, economic secretary to the Treasury, said: "The Government welcomes the commitment from GISC to a firm launch date, which will see it up and running within just two years from the initial announcement made by my predecessor Helen Liddell in July 1998. We look forward to GISC fulfilling its objectives of maintaining and improving professional standards in the transaction of non-life insurance business."

This assurance has not satisfied Andrew Paddick, director-general of the Institute of Insurance Brokers. He has written to Johnson demanding to know how GISC intends to investigate consumer complaints without having any official arrangements in place.

He said: "I do not think Ms Johnson has been kept up to speed by her civil servants.

"GISC has got itself in an absolute mess and it has gone into panic mode."

Paddick added that in contrast to the GISC, the Insurance Brokers' Registration Council has the qualified staff and powers to conduct rigorous investigations of registered insurance brokers.

The IIB's concerns are repeated by the National Association of Bank and Insurance Customers, which has been closely involved in the setting up of GISC.

Its chief executive Stuart Cliff said: "I would argue that GISC has not got the resources to investigate consumer complaints. It does seem ill-considered for them to say they will be ready in July. There is one lesson I have learned from insurance complaints and that is they are never simple and more than one party is usually involved."

The National Consumer Council has also registered its concerns in an open letter to GISC chief executive Chris Woodburn. It recommends GISC uses staff seconded from the Insurance Ombudsman until the FSA sets up a viable complaints scheme.