The Institute of Insurance Brokers (IIB) is threatening legal action against Royal & SunAlliance (R&SA) over the insurer's new terms of business agreement (TOBA).
IIB director general Andrew Paddick said it objected to the new R&SA TOBA because the insurer is not prepared to include a "non-solicitation" clause, stating that it will not approach a broker's clients directly.
Paddick described the current situation as a "one-off window" for insurers, as the FSA was requiring all insurers to review their TOBAs before regulation begins next year.
"The issue isn't about who owns the client - the client owns themselves. It's about using data and confidential information arising from the broker-client relationship," Paddick said.
In a letter to brokers dated 13 July, Paddick said that if brokers collectively refused to sign such a TOBA, it would constitute a notifiable agreement under the provisions of the Competition Act.
Paddick said that, so far, it had received several hundreds of responses from brokers supporting the action and committing to contribute to a "legal fighting fund". He described the support as "overwhelming" and said the IIB would proceed with legal action if it received 1,000 responses of support.
But, in several of the responses, brokers indicated that they may sign a TOBA that did not include a "non-solicitation" clause under threat of agency termination.
An R&SA spokeswoman confirmed that the insurer started the process of issuing the TOBAs this week. R&SA director of commercial business Brendan McManus defended its position. He said: "I am surprised and disappointed that Andrew has written to IIB members in the manner that he has. Especially as his initial response to R&SA's proposed TOBA was positive, stating that it was 'quite good and well drafted'.
"We have resisted the inclusion of a 'non-solicitation' clause, because to do so would preclude any proactive contact with policyholders. This means that if the agent goes out of business, has been conducting his/her business in a dishonest manner, does not obtain FSA authorisation, or our policyholders' interests are at risk, we will have no route to contact them without breaking the TOBA."