For a quarter of a century the insurance broker and intermediary market has lived in a fool's paradise of regulation, with an act of parliament - the Insurance Brokers' Registration Act 1977 (IBRA) - ...

For a quarter of a century the insurance broker and intermediary market has lived in a fool's paradise of regulation, with an act of parliament - the Insurance Brokers' Registration Act 1977 (IBRA) - that was a toothless poodle.

The IBRA, abolished earlier this year, was neither fish nor fowl - it only regulated the use of the word "broker" and not the actual business of insurance broking. Those who did not wish to come under this statutory body stayed out; those who were members and wanted to leave (even if they had fallen foul of the disciplinary proceedings) could leave - and stay in business.

But insurers were not concerned with the niceties of whether they dealt with a broker or an intermediary. They just simply set up their own monitoring system for non-Insurance Brokers' Registration Council (IBRC) intermediaries.

The decision of the incoming Labour government in 1997 to opt for self-regulation for general insurance meant the industry had to get its own act together. The result: the General Insurance Standards Council (GISC).

But many IBRC members were unhappy; they saw themselves as an elite that had accepted statutory regulation. Hence the decision of the Institute of Insurance Brokers (IIB) to set up its own regulatory body, the Institute Registered Insurance Brokers (IRIB).

The GISC has a timetable to the end of this year that makes it tougher for insurers or their agents to deal with non-GISC members under its controversial rule F42.

Between now and October 15, members and applicants, and their actual and prospective appointed agents or sub-agents, are expected to review their relationships to ensure that, by that date, they are not dealing with any intermediary in breach of rule F42.

From October 15, only those firms that are GISC members, or have applied to join, can conduct business with GISC members. And from the new year, GISC members cannot deal with non-members at all.

It is this "monopoly" to which the IIB has strongly objected, but appeals to the director general of the Office of Fair Trading have failed. However, both the IIB and the Association of British Travel Agents have appealed to the Competition Commission Appeals Tribunal, and a decision is expected shortly.

One major change involving the GISC is that, for the first time, former IBRC members face compliance visits, just like the Association of British Insurers (ABI) intermediaries have done.

More than 500 visits have already been carried out, including preliminary visits to the 140 Lloyd's brokers. This is a huge task, involving two firms of auditors, former IBRC brokers being monitored by Ernst & Young and other intermediaries by Pricewaterhousecoopers.

GISC head of monitoring, Steve Barrow, says: "We emphasise the need for the broker to take the initiative. The key point about our rules is that they are not prescriptive. We are looking for brokers to take the rules and apply them to their own way of working. They are the people who know their business best."

He adds: "We have not had anybody say this is unworkable and cannot be done, but there are obviously areas where compliance needs to be improved."

Normally, members will receive advance notice of a visit, and each visit is tailored towards the individual firm. The larger the organisation, the greater the emphasis on reviewing high-level management controls.

The IIB, however, insists on monitoring its own members. IIB director general Andrew Paddick says: "We have always had the ability to discipline members within our own organisation. We expect members of our institute to be doing a proper job in the consumer interest. I do not want to force anybody to be regulated by IBRC Mark 2 or the GISC. I want them to have choice. The IRIB is what we use for the individuals of the former IBRC. We have nearly 5,000 of them."

The IIB view is that someone has to regulate individuals, as GISC is only taking corporate entities into their scheme.

Another key development is ensuring that intermediaries and their staff have the highest professional qualifications. The Chartered Insurance Institute (CII) has become the first organisation to be awarded a contract by GISC to provide a training scheme accreditation service on its behalf.

For the first time there will be a qualification (by examination) specifically tailored to their needs - the Chartered Insurance Broker status. This qualification is only available to CII members who are either fellows or associates. However, learning does not end with chartered status - continuing professional development is required.

CII director general Dr Sandy Scott says: "The CII is ideally placed to verify the technical content of training schemes and we have a national network of assessors who are qualified to deliver the service."

There is also a new basic test that intermediaries and staff can sit - the Foundation Insurance Test (FIT). It is specifically designed for those who come into direct contact with the public, or whose activities can affect the quality of service provided.

FIT consists of a test covering the general insurance market, risk and insurance principles and procedures, and builds on product knowledge gained in the workplace.

Holders of FIT will then be encouraged to sit for higher qualifications such as the Insurance Foundation Certificate and the Certificate of Insurance Practice.

The GISC has also introduced competence and training rules to ensure staff have the basic knowledge and abilities to perform their tasks satisfactorily.

This industry-wide move to bring everyone under a single regulator and to raise professional standards is a bold venture. It is not without its critics and these are very early days.

What concerns many in the industry is that if the GISC fails, then Big Brother - the Financial Services Authority - could step in and take over, and nobody wants that.

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Trade associations
The future role of the trade associations, given the new regulatory atmosphere, is crucial. What are their plans?

Earlier this year, the Department of Trade and Industry (DTI) brought out a report entitled The Modern Trade Association. In it, Patricia Hewitt, then the Minister for Small Business and

E-Commerce, said: "Trade associations have a vital role to play in promoting best practice, helping firms become more competitive and formulating effective public policy. As in the commercial world, the business of representation requires investment of time and money to deliver returns."

British Insurance Brokers' Association (BIBA) chairman George Nixon says he believes his organisation has complied with the DTI's report. He adds: "With our strategic leadership workshops, our range of successful training programmes and our work on the technology front, not to mention our representational abilities - working with our members where it matters, with GISC and the government - we feel we are indeed living up to this report.

"We also offer some of the best custom-made insurance schemes in the business, and our industry profile has never been stronger, because our focus is on delivering quality services and high level and professional representation. Our membership is also thriving - in the past few months we have attracted more than 200 new members."

IIB head of technical services, Ann Peel, explains the new online educational programme, to be launched soon for their own planned regulator, the IRIB.

She says: "We have individual former IBRC members and we set up a register and invited them to become members. We want to provide ongoing facilities to enable them to keep up to date and record their continuing professional development (CPD) activities.

"We would like to be able to have a structured training scheme for people who work in brokers' offices, targeted at the practical aspects of insurance broking."

The IIB is devising various modules that IRIB members can access, as well as undertaking training and examinations through the internet.

The website for individuals to keep up to date with news and look up training courses will be active very soon.

Peel adds: "We are looking to September to have some of the training modules ready and expect students to take courses in two parts: the first part on personal lines, the second on commercial insurance.

"Each part would have to be completed within a year, giving two years overall to complete the courses. The IIB is hoping to obtain sponsorship from insurers to offset the cost to students."

Chris Artur, secretary general of the Association of Independent Intermediaries and Brokers (AIIB), says his organisation is helping its members through information updates on the new regulations and support materials, such as its recently published Terms of Business Agreements.

He adds: "We are working with the GISC to ensure that the evolving regime and rules are sensible and practical in their implementation. There are some aspects of the GISC that we remain uncomfortable with, and we hope to see these aspects addressed as the regulator progresses.

"The AIIB will maintain a watchdog role to draw attention to, and resist, any bureaucratic excesses into which the GISC might fall. The need for membership of an active trade association for intermediaries has never been greater as far as regulation issues are concerned.

"We will assist our members with any difficulties and make representation to the GISC on their behalf."