Conservative opposition MPs are lining up behind the Institute of Insurance Brokers' (IIB) attack on the fledgling regulator the General Insurance Standards Council (GISC).
Shadow economic secretary to the Treasury Howard Flight told an IIB parliamentary reception last week that he had met the GISC staff and was not impressed.
“When I met with them last week I felt there was a degree of uncertainty. They have been dumped with something that is seemingly unworkable,” he said
Flight insisted the Treasury would have to rethink its plans for the GISC to be a single regulator.
“The people running the GISC have plenty of goodwill but it is the lack of adequate thinking behind it that is the problem,” Flight said.
Flight's comments came as the IIB announced the results of its survey of broker opinion, which revealed that more than 90% of UK insurance broking practices did not want to join the GISC.
More than 1,000 firms responded within the first 10 days – and further returns are being received every day.
Paddick said: “91.9% do not want to join the GISC and have voted in favour of being regulated by the IIB's new non-statutory administration, utilising the infrastructure already in place which administers the Insurance Brokers (Registration) Act 1977.
But the IIB survey has been panned by brokers who refused to respond, claiming the wording was weighted in favour of the IIB's preferred outcome (see letter, page six).
Paddick insisted it was representative. The IIB reckons 1,500 insurance broking practices would seek regulation via the body it was establishing from May 1, 2001 – the day after the Insurance Brokers (Registration) Act is due to be repealed.
The GISC has applied to the director general of fair trading for an “exemption” under the provisions of the Competitions Act 1998 which, if granted would allow GISC member insurance companies to cancel agency/terms of business agreements with brokers who refuse to join the GISC under the proposed Rule F42 and force them out of business.
Paddick says that all the insurance company senior executives the IIB has spoken to state that they have no problem with brokers having their own professional regulatory body instead of being forced into GISC.
However, they also admit to pressure being applied on them by the Association of British Insurers (ABI) to “toe the party line”.
Paddick says that Lloyd's proposes to restrict direct access to underwriting syndicates operating within its market-place to GISC member brokers only – although it has stated that it will accept brokers regulated by overseas bodies of “GISC equivalence.” Paddick wants Lloyd's to recognise the IIB's body.
The IIB has received advice that Rule F42 breaches both Chapter 1 and Chapter 11 of the Competition Act – being anti-competitive and an abuse of a dominant position. The IIB has lodged an official objection with the OFT.
Paddick adds: “Apart from the technical objections about the GISC regime and Rule F42, the result of our survey will be an extremely important part of our submissions to the OFT.
“It would be a pointless exercise striving to have F42 condemned or exempted on a conditional basis if there were not a viable number of brokers supporting us. No longer do I feel on my own – the vast majority of the profession is right behind me.
“We wrote to the GISC suggesting that they grant a waiver to F42 in favour of brokers to be regulated by our body. They refused. Had they agreed, we would have withdrawn our objection. We sought mutual recognition and co-operation but this has been declined – I suspect out of the sheer monopolistic cartel-style arrogance of GISC.”
The GISC said its could not agree to the IIB's unreasonable terms.