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LONDON -- Business standards among U.K. brokers may weaken following a government decision to disband the authority that regulates them, an industry association warned last week.
Economic Secretary Helen Liddell early last week told Parliament that the U.K. government intends to repeal the Insurance Brokers (Registration) Act 1977, dissolving the Insurance Broker Registration Council, in a prelude to introducing draft legislation on U.K. financial services regulation late last week.
A British Insurance & Investment Brokers' Assn. spokeswoman said disbanding the IBRC could lead to "a rapid fall in standards."
Ms. Liddell said the combination of the 1977 Act and the Assn. of British Insurers' general business code of practice for selling insurance resulted in an incomplete and outdated framework of regulation, a view reinforced by responses during a recent consultation period on broker regulation (BI, April 27). She called for increased self-regulation by brokers.
"Our consultation has reaffirmed my view that a case for continuing statutory regulation through the registration of insurance brokers has not been made," said Ms. Liddell.
The IBRC regulates all organizations that use the title of insurance broker. Repealing the 1977 act would mean a lifting of restrictions and regulation of businesses wanting to call themselves insurance brokers.
"I now look to the industry itself to put the desired standards on a soundly established footing from which they will command widespread support," said Ms. Liddell.
But until that footing is reached, broker clients may lose confidence because of the resulting hole in the regulatory framework, said the BIIBA spokeswoman.
BIIBA meanwhile has extended its membership criteria to admit currently unregulated intermediaries as well as IBRC-regulated brokers. BIIBA estimates this could double the association's current membership of 2,500 organizations.
"Our concern is that the government is repealing the IBRA without putting in place statutory requirements," said Mike Williams, BIIBA's chief executive.
"This could cause a dilution of professional insurance standards for the industry. . . .We urge IBRC firms and non-regulated intermediaries to join us to ensure that during the transition period before the new regulatory body is put into place high professional standards are maintained," he said.
In contrast, the ABI welcomed Ms. Liddell's statement as an early indication of the draft legislation for financial services regulation. ABI Director General Mark Boleat said the association was particularly pleased that self-regulation will become the standard regime in the industry.
"The insurance industry must work together now to ensure that self-regulation works well in practice and provides good consumer protection," he said. "The industry is fully committed to ensuring the ABI general business selling code works effectively and gives the required consumer protection."
The ABI immediately showed it intends to enforce its sales code by warning 150 independent U.K. intermediaries last week that they have 28 days in which to file an annual review form or risk losing their agency appointments. The ABI uses the form to keep track of certain intermediaries doing business with the association's member insurers.
"Action we are taking today shows that self-regulation can have real teeth with disciplinary action to support it," said Mr. Boleat.