Health Insurance has conducted a straw poll on whether intermediaries agree with the recent Competition Commission ruling that the General Insurance Standards Council’s (GISC) Rule F42 is in breach of the Competition Act 1998.
The poll has shown that while most insurance companies and intermediaries are in support of the GISC as a single regulatory body, it is flawed and needs to be thought out more thoroughly.
The contentious Rule F42 requires GISC members (which include insurers) to deal, in the UK, only with intermediaries operating under the GISC regime.
Earlier in the year the Office of Fair Trading decided GISC rules did not infringe competition law and its rules were transparent, non-discriminatory and based on objective standards.
Director General of Fair Trading John Vickers said, originally: “When people buy general insurance they need to have confidence in those selling the products. Self-regulation can protect consumers and give this confidence, but it must not be allowed to restrict or distort competition and drive up prices. I am satisfied that the GISC’s rules are unlikely to have this adverse effect.”
This cleared the way for the GISC to introduce its full regime, including Rule F42, making membership compulsory. This was necessary because there is no statutory requirement for GISC membership.
But following an appeal by the Association of British Travel Agents (ABTA) and the Institute of Insurance Brokers (IIB), the Director General of Fair Trading’s decision has been overturned by the Competition Commission Appeal Tribunal (CCAT). Now the GISC is to apply for an exemption under the Competition Act 1998 and will be seeking support from the government, consumer bodies and the industry.
Association of Medical Insurance Intermediaries (AMII) committee member Stephen Walker said: “The GISC should have applied for an exemption in the first place so this could have been avoided.
“But the AMII will continue to support the GISC and reaffirm its policy as a professional trade association of requiring its members to continue to commit themselves to the GISC regulatory regime. There needs to be regulation and we’re hopeful the exemption application will eventually succeed.”
Liz Hammond, the director of customer services at Private Medicine Intermediaries, said: “The ruling doesn’t mean the GISC is wrong. Some intermediaries felt bullied into joining but although we joined quite early on we joined for different reasons.
“We wanted to support a body of self-regulation and having the GISC logo everywhere would be good for our clients and for our credibility. We felt it was right and proper.”
Valerie Levene, a specialist PMI intermediary in north London, said: “I think it’s very sad the GISC has come this far for the decision to have been upheld.
“I think the industry is in need of a self-regulator or the alternative is the government. The GISC has to find a way around Rule F42, whether it is to amend, adjust or omit it.
“It takes time and is onerous to join but if you are a half-decent broker then there is nothing to fear. We have to tidy up our industry and get the cowboys out.
“One of the biggest priorities is to sort the insurers out. All insurers need to put their service standards and methods of operation in some workable and fair format because at the moment insurers are not answerable to any body.
Premier Healthcare director Alex Coffey said: “I’m not at all as enamoured by the GISC as I was initially because I have since discovered it is really to control intermediaries and not providers.
“It is biased against the intermediary. I can honestly say we’ve never had a complaint about the quality of our service but I’ve had numerous complaints about insurers’ absence of services. The providers themselves leave a lot to be desired.
“The GISC should appeal against the decision. There is little point in having a government appointed regulatory body if they’re not going to be able to exercise control over the entire market.”
Essential Health principal Paul Walker said: “I am disappointed. The GISC appears to be all noise and no action. I raised a few issues for the GISC but it doesn’t seem to be interested in consumer protection.
“They want to know if we’re recommending that clients take out travel insurance and other various benefits, which is not our approach. We’re not a pushy sales organisation. And the board is made up of a number of insurance representatives. They should be more clued up.
“Having said that, I would prefer the GISC to take up self-regulation rather than the Financial Services Authority (FSA). It’s a shame the Rule F42 didn’t go the way they wanted it to because it would have given them teeth to their bite. Now they’re not taken seriously and it seems to have divided the industry.”
Ryan Insurance Group healthcare consultant Nicola Shepherd said: “We decided to join GISC and remain committed to its principles. We believe GISC is the best hope of regulating the general insurance industry and consider this a better option than running the risk of being regulated by the government.”
Healthcare Matters principal George Connelly said: “ If we don’t have the GISC we will have to have something. We all support the GISC and hope it, or something similar, comes into existence because we need to aspire to standards.
“There has been so much time and money invested in the issue. If membership is not compulsory it loses a lot of its power and ability to make intermediaries give a proper service and establish standards.”
Health Plan principal Michael Payne said: “As members, we continue to support GISC.
“If we don’t support it then we could be shooting ourselves in the foot. As we know from experience, when the government gets involved it becomes costly, ineffective and bureaucratic.”
Goldstar Insurance Services director Nitin Patel said: “It needs to be more thought out in terms of introducing regulation in general insurance. The GISC is to be a universal regulatory body but it might be better to have introduced a different regime.
“There should be a balance because at present PMI brokers based overseas are not subject to regulation and are not following the same rules. But GISC regulation will be good for the industry.”
NIMIS principal Zig Malendewicz said: “The GISC is a very good idea but to say you can only trade with GISC members is anti-competitive. If insurance companies insist only GISC members can sell their products then that will be fine.”
Clifton Associates principal June Williams said: “It cannot have been worded correctly in the first place. I think it is a good idea that people should be regulated but I believe in legislation, not self-regulation.”
Drew Folland Financial Management principal Drew Folland said: “It’s like anything else: if there is one less bit of regulation then it’s easier for us. To be honest we were in the process of applying to the GISC but I’m not going to send the forms off until we know what’s going on. As a small independent financial adviser with very little voice in these changes, we just have to sit back and wait for it to happen.”
Gee & Company managing director Jennifer Storrow said: “We joined the GISC about nine months ago and from what I can recall it was a fairly arduous form to fill in as it was going to be the be-all and end-all of regulation. Any weakening of that rule is going back on a small chance. We live in a regulatory age for better or for worse and I think that everyone should be regulated by the GISC. Otherwise any Tom, Dick or Harry would be able to sell insurance.”
Paul Brantingham, the managing director at Integra Healthcare, said: “The latest developments undermine the GISC but we feel all parties involved have got to work out a mutually acceptable solution. The alternative is governmental regulation and that’s not what any of the parties want.”
It is a confusing picture, and even the insurers are now unsure of where they stand.
Nye Jones, the intermediary development manager at PPP healthcare, said: “We’re still waiting for the GISC and the Office of Fair Trading to respond to the CCAT ruling and after that we’ll be better poised to review our current position, although we continue to support self-regulation.”
David Ashdown, the communications director at Western Provident Association (WPA), said: “We’ve been strongly in favour of the GISC from the very beginning.
We think it has got to be reviewed but we hope we can all work to live up to the principles of the GISC’s objectives because it safeguards everyone and protects the industry.”
So where are we now?
According to the Competition Commission Appeal Tribunal, a provision such as Rule F42 whereby a group of suppliers, acting collectively, agree not to deal with certain persons, ie non-members of GISC, is a provision that has, as its object or effect, the prevention, restriction or distortion of competition.
GISC spokeswoman Rachel Maidment said: “We have some 6,000 members that demonstrated their commitment to standards of good practice and that’s a positive move on their part. For the moment, we will remain a voluntary regulatory body.
“We will be exploring opportunities to bring into membership the vast majority of business to get involved in GISC so consumers are protected by a common set of standards in the industry.”
Institute of Insurance Brokers (IIB) director general Andrew Paddick said: “We’re continuing with our regulatory council for independent insurance advisers who essentially work for their clients as opposed to the risk carriers. A tied agent or direct sales agent pushes its own products and is hardly independent.
“The GISC is a badge for everyone and you cannot guarantee quality impartial advice. Our members can guarantee independent advice to their clients.”