The Treasury’s decision to expand the Financial Services Authority’s (FSA) remit to general insurance broking may mark the end of the General Insurance Standards Council (GISC).
It is thought that the decision may have been influenced by upcoming European legislation.
The Insurance Intermediaries Directive (IID) was agreed by the Council of Ministers on 26 November. The IID will require member states to introduce regulation of persons conducting general insurance and reinsurance mediation. Once it has been agreed by the European Parliament and formally adopted, member states will have two years to implement the directive.
Economic secretary Ruth Kelly said the decision would make life simpler for advisers operating in a number of different markets as well as opening up a number of new opportunities. She said: ‘Brokers who deal in two or more lines of regulated business will deal with a single regulator, not several, and will be able to compete in European markets.’
The decision raises the question of the future of the GISC. The organisation remains the setter of standards for selling general insurance products but, as things stand, will have no role once the FSA takes over.
The Association of British Insurers (ABI) has argued for a continuing role for the GISC. Mary Francis, ABI director general, said: ‘There remain many questions to be resolved about the regulatory regime going forward. One point however is clear: while the new arrangements are being decided, the industry must and will continue to work through the GISC to maintain proper customer protection and to ensure that membership of the GISC is acknowledged by the new regime.’
The GISC board met the day after the announcement and agreed not to pursue two initiatives. The application to the Office of Fair Trading, to overturn the ruling that stated GISC members could not be forced to only deal with GISC members, will be dropped, as this will be achieved by statutory regulation. The board has also scrapped intentions to announce board nominations for 2002 before the end of the year. As responsibilities will now devolve to the FSA this is no longer appropriate, even though the interim period before the FSA takes over may be around two years.