The majority (96%) of general insurance brokers are confident they will be fully prepared for and on time to submit their applications by July 2004 to seek FSA authorisation.
The survey, by Grant Thornton's Financial Markets Group revealed that 53% of the 160 respondents believe that once regulation comes into effect, corporate and personal risks will not increase, or will not increase much compared with GISC regulation.
Of the respondents, only 16% said they thought the current GISC regulation was very effective. Of the firms surveyed, 43% admitted they probably didn't comply will all of GISC's requirements, said Grant Thornton.
Ian Gorham, partner within Grant Thornton's Financial Markets Group, said: "If the general insurance market thinks that FSA regulation will be similar to GISC, and life will return to what it was once their application has been submitted, they are making a grave mistake.
"Corporate and personal risks will definitely increase as a result of regulation. FSA is a regulator with teeth, and the earlier the industry takes stock of this the better."
"The FSA requirements are very wide reaching. It's not just a case of submitting your application and forgetting about it."
The survey revealed that for 78% of respondents, preparing for FSA regulation is one of their top five business risks, with the costs of compliance varying from firm to firm.
Grant Thornton said there appeared to be a mixed understanding of what the practicalities of FSA regulation will mean for the industry when it comes into effect. It said that in the survey, 72% of respondents failed to recognise key regulatory terminology when asked, and 40% of the top 50 brokers had not budgeted for how much their preparations would cost.
"Whilst regulatory compliance has carved a place amongst the top five agenda items for general insurance brokers, many firms face challenges in coming to terms with FSA regulation and finding the right expertise to prepare properly", said Gorham.
"60% of firms said they would transfer internal resources to address these issues, and 50% intended to bring in consultancy expertise.
"Unfortunately, there is only a limited supply of high quality regulatory expertise in the marketplace and all these firms leaving it late will be going after it at once. Many will be in trouble if they don't act quickly," said Gorham.
"The survey shows there is a lot of confusion and differences of opinion. General insurance brokers need only to look to the investment business market, where the FSA has imposed significant fines, past business reviews and rectification work, and also been willing to close firms down where necessary.
"General insurers and brokers need to act now, get a proper preparation project underway and avoid complacency." concluded Gorham.
