The Institute of Insurance Brokers looks set on a collision course with consumer groups, the Treasury and insurers after it voted to continue the Insurance Brokers' Registration Council as a "self-regulatory professional body".
The move flies in the face of industry attempts to set up the all-industry General Insurance Standards Council (GISC) and consumer groups voiced alarm, warning that two regulators would be confusing. Stuart Cliffe, chief executive of the National Association of Bank and Insurance Customers, said: "We're moving back to a spaghetti junction of regulatory bodies. Consumers are demanding a one-stop shop for redress and the GISC is gradually fulfilling this role."
The dramatic step by IIB director-general Andrew Paddick follows talks with European Commission officials in Brussels. Paddick said the EC directive on cross-border insurance broking left room for more than one regulator. He said: "The EC has not said there should be only one insurance regulator. There could be one for brokers and another for direct sellers and tied agents."
The IIB will administer the IBRC's statutory scheme until the Insurance Brokers' Registration Act is repealed. Paddick said this will happen on 30th April 2001.
As a first step towards prolonging its life, the IIB has formed IBRC Limited, to take over the body's regulatory functions. The IIB has offered to complete the statutory run-off on behalf of the Treasury and the IBRC.
Paddick has taken a legal opinion on its proposal from a leading QC and will issue this shortly. The IIB believes it will clarify the legal framework for regulation of general insurance. Paddick also claimed the majority of brokers would be better off staying with the IBRC than joining the GISC.
IBRC member firms currently pay a flat-rate fee of £325 per year, however the GISC's fee structure is based on turnover and runs from a minimum of £200 for commission levels below £200,000 up to a maximum of £100,000 per firm.
An IBRC spokesman said membership renewals, which began on 1st May, are running at similar levels to last year. It has 3,000 corporate and 10,000 individual members.
The IIB's plan met with consternation from senior figures in the insurance industry. Biba chairman, Simon Bolam, who is also an IBRC council member, said he was disappointed the IIB had decided not to work with the rest of the insurance industry in supporting the GISC.
He warned the government could still impose statutory regulation if the insurance industry failed to agree on regulation. "The UK government has told our industry to create a single, non-statutory regulator and said that if we fail to achieve this, the alternative would be regulation by the Financial Standards Authority." Bolam said he would remain on the IBRC until its demise.
Another IBRC council member, Aiib chairman Mike Slack, said there could be an inherent conflict of interest. "I don't understand how the IIB can be both a trade association and a regulator. It's like trying to be poacher and gamekeeper at the same time."
A spokeswoman for the GISC said the IIB's move was an issue for the Treasury.
|Open to all selling insurance||No||Yes|
|Fee||£375 flat fee||£200-£100,000 (0.1% of commission)|
|Commission disclosure||Yes||If main business is insurance|
|PI cover||Three times turnover, max £5m||£1m per claim, three times net retained brokerage, max £10m|
|Segregated accounts||Yes||Only if selling more than one insurer's products|
|Compliance visits||No||Only if selling more than one insurer's product|
|Public disciplinary hearing||Yes||No|
|Customer redress||No||No – compulsory through the FSA Ombudsman|