The Retail Motor Industry Federation is advising members who sell insurance products that they now do not need to join the General Insurance Standards Council (GISC).

The federation welcomed the fact that Rule F42, which states that GISC members may not deal with non-members, has been postponed by the Competition Commission. The commission ruled that the scheme contravened Chapter 1 of the Competition Act 1998.

The RMI accused the GISC of failing to take into account the needs of those small businesses for whom insurance sales were not their core business.

Legal adviser for the RMI, Tim Ensor-Clinch, said: “The GISC seems to overlook that its rules require lots of bureaucracy and high costs for smaller companies.

“There is the training and the requirement that members should have professional indemnity, which is hard to get quoted for and is many times greater than the cost of being a member of the GISC.”

He added Rule F42 was “accompanied by the threat that the insurer will deal directly with the intermediary's client if the intermediary does not join the GISC”.

A GISC spokeswoman said: “The rules represent a sensible balance in good business practice, not unattainably high ideals.

“For example, we are not expecting [staff in] a car showroom to be insurance experts, but if they sell insurance, they must be competent.

“RMI members have a code anyway, so they are used to complying.”