Rule F42 cannot be legally implemented at present also GISC membership will remain voluntary, says Catherine Nicoll
Since the early proposals for the setting up of an independent self-regulatory body for the sales and advisory activities in the general insurance industry were published in late 1998, intermediaries have been wondering what their position would be once the framework was in place.
The General Insurance Standards Council's (GISC) original stated objective was to build a regulatory framework which would embrace within a single regime the majority of businesses involved in general insurance, not just those for whom it is the core business.
When the rules were first published in June 2000, the GISC unveiled a plan to bring into effect ' once it had been legally authorised ' a rule requiring GISC members to only deal with intermediaries who are members of the GISC and a timetable was published.
Clearance for the rules was granted by the Office of Fair Trading (OFT) in January 2001 and an appeal brought by the IIB was dismissed in the following April. The IIB, then joined by the Association of British Travel Agents (ABTA), lodged an appeal to be heard by the Competition Commission Appeal Tribunal (CCAT).
Shortly before the decision of the CCAT was announced on 17 September 2001, the GISC withdrew the proposed timetable for the implementation of Rule F42.
The CCAT's decision that the director general of the OFT had been wrong in law to grant the GISC clearance now means that Rule F42 cannot, for the time being at least, be implemented and membership of the GISC will continue to be voluntary for some time.
The OFT and the board of the GISC have decided not to appeal the CCAT decision. However, the GISC is now considering asking the OFT to consider its original application for exemption. The timeframe for this is uncertain at the moment, but it is unlikely that the OFT would be able to make its decision until the summer of 2002.
Intermediaries have been assessing how the GISC proposals and the recent developments will affect them. Should Rule F42 eventually come into force at some stage, then those intermediaries who advise on private medical insurance (PMI) or other general insurance products will be caught by it. They will then have to join the GISC if they wish to place business with insurers or wholesalers who are GISC members.
However, for the time being, intermediaries are free to conduct these classes of business with GISC insurers or wholesaler members without being members themselves. Those intermediaries who advise on critical illness, income protection and long term care will not be affected by the GISC, even if Rule F42 were at some time in the future introduced, since these products fall outside the scope of the GISC.
This extension in the timetable for the possible introduction of Rule F42 also gives more time to enable the GISC, the Association of Independent Financial Advisers (AIFA) and the Financial Services Authority to come to an understanding about the regulatory position concerning advisers selling waiver of premium, including coverage for unemployment, in connection with stakeholder pensions. This is a general insurance product, but the AIFA is keen to establish that double regulation is avoided.
