British brokers are breathing sighs of relief following a decision last week by the Financial Services Authority (FSA) to drop its plan to give small businesses the same status as private consumers. Its latest discussion paper says it will classify small business as “commercial customers”.

The FSA has dropped many of its “good idea” draft rules following submissions from insurers and brokers. Now brokers will only have to disclose their commission to commercial customers, but must disclose any financial holding insurers may have in their companies.

Insurers will have to give private consumers more information on their claims, with five-day increments for responding to a claim notification and five days for paying the claim once settlement is reached. The FSA says it expects responses and payments to be “prompt”.

The Association of British Insurers (ABI) has praised the more relaxed line being taken by the FSA, which has maintained that it has to follow European Community directives for dealing in insurance. ABI Head of General Insurance John Parker said the FSA is now taking a “sensible and flexible approach. These draft rules build on the good practice already widespread in the general insurance market.”

The new rules will be finalised in January.