The tug of war continues in the UK over its new regulatory regime, with the release of the Financial Services Authority Consultation Paper 160: Insurance selling and administration. The British Insurance Brokers’ Association (BIBA) and smaller broker groups have released their responses and there is little joy all round.

BIBA CEO Mike Williams said the crucial issue for brokers is the FSA’s proposed definition of a private customer. With the FSA focused on providing small businesses with the same level of regulatory protection as consumers, the paper proposes that brokers treat all commercial clients turnover of less than $2.64 million per year as individuals. Such a move would result in a reclassification of around 3.7 million companies, or 97% of the UK’s businesses.

The brokers are dead against the idea, saying it would be difficult and costly. Mr Williams said small businesses should not be given the same regulatory protection as individuals. “It is illogical to apply a level of statutory protection at a similar level to the unsophisticated private policyholder, with no commercial experience whatsoever,” he said.

What the two associations suggest instead is that all incorporated companies, regardless of their turnover, be treated as commercial customers, and that only unincorporated businesses be classified as private customers.

The Institute of Insurance Brokers (IIB) has also contributed their two bobs’ worth, with Director-General Andrew Paddick saying “IIB does not believe that businesses should be afforded exactly the same regulatory protection as private persons effecting insurance in a purely personal, domestic or family capacity”.

Mr Paddick said the proposal to classify SMEs as private customers “would not only unjustifiably extend the boundaries of our ‘Nanny State’ considerably, it would of itself create a number of serious problems within the regulatory arena”.