By Kirstie Redford Broker body, the Institute of Insurance Brokers (IIB), is planning to appe...
By Kirstie Redford
Broker body, the Institute of Insurance Brokers (IIB), is planning to appeal against the Office of Fair Trading's (OFT) decision to give the General Insurance Standards Council's (GISC) rulebook the all clear, following an investigation into whether it was in breach of the Competition Act.
The ruling means that the GISC, launched in July 2000, will now be the sole regulator of the general insurance industry in the UK and member insurers will be unable to do business with non-GISC intermediaries.
The regulatory body, set to affect at least 16,000 firms throughout the UK, aims to improve standards in the industry by enforcing a universal code of practice, but has been the subject of much criticism due to the cost of compliance incurred on intermediaries. As the rulebook states that members will be unable to transact business with non-members, concerns were raised that the body would bring unfair competition, with smaller brokers pushed out of the industry because they could not afford to comply.
John Vickers, director general of Fair Trading, is confident that the rulebook does not infringe the competition law. He said: "Self-regulation can protect consumers and give confidence, but it must not be allowed to restrict or distort competition and drive up prices. I am satisfied that GISC's rules are unlikely to have this adverse effect."
But Andrew Paddick, director general of the IIB, insists that the OFT's ruling overlooks part of the Competition Act and will result in a market monopoly.
"We are astounded, as our lawyers are, at the OFT's decision. I am particularly disappointed at the director general who only looked at chapter one of the Competition Act and not chapter two which includes the abuse of dominant position. The insurers concerned have an 85% share of the market clearly a dominant position.
"I have been in conference with Nicholas Green, QC, with a view to appeal the decision and believe we will pose a serious challenge.
"There has been an overwhelming response from brokers, a lot of whom are extremely angry. The Competition Act was only brought in in 1998 and is a new piece of legislation that needs to be looked at. But in view of the intimidation and pressure the GISC has exerted on brokers, there may be other acts under the law which we can use to appeal against the decision," said Paddick.
Chris Woodburn, chief executive of the GISC, said that the board will be consulting the industry to ensure a "fair and practical" programme of introduction.
PPP Healthcare, along with other major players in the industry, have given full support to the GISC and believe the new regulations will have a positive impact on the industry. Nye Jones, channel distribution manager, said: "PPP has always fully supported the GISC. We believe the rulebook will safeguard products for consumers and increase confidence."
Mike Hall, managing director of Standard Life Healthcare, had a similar response. "It is in my view that a strong single regulatory system is in the best interest of all sectors of the industry and that we should work together to ensure that GISC is a success."
PMI intermediary Michael Payne, proprietor of Healthplan, also showed his support for the ruling, saying: "At the moment there are too many regulators which gives grounds for confusion. Nothing in the GISC rulebook causes us a problem and any other intermediary who runs a sound business should not find any problems with it either."
