As plans are made for IBRC Mk2, Andrew Paddick, director general of IIB, asks whether the new GISC rules are in the best interests of consumers.
Unfortunately, the recently published GISC rulebook is deeply flawed, inconsistent and illogical in many material respects. Furthermore, the proposed GISC regulatory regime fails to handle the transparency of adviser status, ultimate and easily definable legal accountability or meaningful consumer protection.
It is astonishing that the council of Lloyd's has effectively endorsed the GISC, by demand-ing that all Lloyd's brokers join and pay up by July 3 2000, or be barred from the underwriting room nine months before the Insurance Brokers (Registration) Act 1977 – to which they are still subject – is due to be repealed. It is even more astonishing that the council has abdicated regulatory control of its own market.
Many Lloyd's brokers are horrified and consider that they have been railroaded into the GISC against their wishes and better judgments, despite the significant reduction in regulatory costs for most and a much more relaxed regulatory environment for all.
I share the view, expressed by a number of Lloyd's brokers, that the council of Lloyd's has made a fundamental error in judgment. There now exists, in my opinion, significant exposure to future market scandals, as a direct result of these “liberalisations” aimed at widely (perhaps I should say, “wildly”) extending the policy distribution capability of syndicates.
We can expect to see further amendments to the Lloyd's Bylaws later this year. They are already causing concern to non-Lloyd's insurance broking practices throughout the UK, who place business via Lloyd's brokers and directly with Lloyd's service companies – especially, if there is any attempt to force them into the GISC as a condition of being free to continue trading with these enterprises as sub-agents.
Essentially, the vast majority of UK insurance brokers do not want to be dictated to by risk carrier organisations such as the council of Lloyd's and the Association of British Insurers. Brokers sensibly wish to keep full control of their independent professional identity and regulatory accountability in the interests of the millions of consumers they serve – a fact well evidenced by over 90% continuing to support the IBRC.
The basic framework for IBRC Mk2 has already been completed. Now, much deep thought and detail needs to go into the draft rules, before comment is requested from the discriminating and highly responsible insurance broking community.
Although much was good about the statutory IBRC regime, certain elements within the rules needed amendment to reflect business practices and consumer expectations in the 2000s.
The most important element of all must be total consumer confidence in the profession. There must be a recognition of the vital role brokers play as independent experts working for their clients, and not the risk carriers. Unless this can not only be achieved, but visibly demonstrated, by a significant number of UK practices subscribing to the very highest standards of professionalism, there will be little point in proceeding with IBRC Mk2. It would not be sustainable – especially if it finds itself having to justify its existence or having to seek competition law relief from any attempted “railroading” by GISC risk carrier supporters.
In my submission, the GISC rules as presently structured have little prospect of being judged in the consumer interest by the competition authorities (both UK and EU), should it proceed in league with the risk carriers to secure the regulatory monopoly it seeks. For such a situation to exist, enormously fundamental amendments would need to be made to the GISC rules – amendments that would be unpalatable to the vested commercial interests of many of its current supporters, including un-elected board members.
Brokers are approaching a watershed. At recent gatherings of the profession, I have been very much encouraged by the level of support for the IIB's entirely honourable stance in this regard. Significantly, this support comes not only from our own members, but also from those who currently finance other associations that they consider to have let them down very badly indeed on this major issue. In particular, they have been disappointed about the complete absence of the level regulatory playing field initially promised by the original GISC advocates and promoters. These people have now grown surprisingly quiet.
It is tough and tiring. One often becomes despondent trying to protect the people one really believes in, who deserve better, when having to face such hostility for speaking one's mind openly and frankly. Fortunately, as has been well demonstrated over the past 13 years, when the going gets tough, the IIB gets going. We are as resolved as ever to win, with fair play and the moral high ground on our side.