The Office of Fair Trading (OFT) has admitted that it only cleared the General Insurance Standards Council (GISC) rules under one half of the Competition Act.

Broker trade body the Institute of Insurance Brokers (IIB) has said it will raise a war chest from brokers to overturn the OFT's decision to clear the rulebook.

It claims the OFT only examined the case under chapter one, covering trading agreements. Chapter two covers the abuse of dominant position. The OFT confirmed that it had only been asked by the GISC to review the case under chapter one, not chapter two. “If someone came to us with a complaint under chapter two, we would look at it, but if we didn't find it to be anti-competitive it is difficult to see how it could be an abuse of dominant position,” it said.

But IIB director general Andrew Paddick promised that a QC's opinion would be circulated to brokers with the request for fighting funds. Paddick said he was “absolutely astounded” at the OFT's decision that would mean “forcing firms into an unelected, self-regulatory body, not accountable to any superior or government authority”.

IIB president John Greenway MP said: “I cannot believe that this is in the interests of professional insurance brokers, nor the clients they serve.”

But rival broker body British Insurance Brokers' Association (Biba) welcomed the move. Biba chief executive Mike Williams said: “We hope it will now pull together the industry in support of what we see as the right regulatory position.” He called on the IIB to abandon its isolationist opposition.

The Association of Insurance Intermediaries and Brokers (AIIB) said: “We're now looking forward to working with the GISC, because it's going to evolve and we want to be part of it, not outside it.”

And the OFT clearance was also welcomed by consumer groups. The National Consumer Council said: “If this is a signal for a single body to regulate the general insurance industry, then it will be a welcome end to the confusing system of having several different regulators, which has left noticeable gaps in terms of consumer protection.”

The ruling gives total clearance to the GISC's rulebook. It says: “The director has decided that none of the rules notified by GISC, by themselves or in combination with the other rules, have as their object or effect an appreciable prevention, restriction or distortion of competition.”

It says: “To be effective, a self-regulatory framework of this nature will necessarily act as a control to ensure competence and consumer protection, on the undertakings that operate in the relevant market.

“The rules do not impose significant barriers to operating in the general insurance industry as the requirements and costs of compliance appear to be reasonable.”

It says: “The rules impede businesses that lack competence or that operate in ways that jeopardise consumers. But that is not anti-competitive.”

Chris Woodburn, GISC chief executive, said: “There are no terms and conditions. It's unambiguous. We are delighted,” he said.

The GISC will establish a working party to push forward its plans.

GISC Chairman, Anthony Howland Jackson said: “This represents a milestone in the development of the GISC and I am particularly pleased that it also recognises our rules as transparent, non-discriminatory and based on objective standards.”

The Treasury, which sparked the rush to find a new regulator and has professed its preference for a single body, said: “We're happy with the standards that have been laid down now the OFT has ruled on them.”