After much controversy, the UK Financial Services Authority has introduced its new regulatory regime covering the general insurance industry.

The industry is grappling with the more stringent requirements, and the authority has released its 2005 business plan aimed at small firms such as advisers and intermediaries.

Chairman Callum McCarthy says the new responsibilities for mortgage and general insurance brokers apply to 14,000 small firms.

“We will be examining, more thoroughly than ever before, the effectiveness of our supervisory work, how easy it is for small firms to do business with us, the benefits and costs of our regulations and rules, and whether there are some we can eliminate.”

Overall the authority expects to be informed about financial matters, threshold conditions, training and competence, conduct of business information, supplementary product sales and fees.

It says the new rules are designed to provide greater protection for consumers and companies through a clearer sales process.

But Director-General of the Institute of Insurance Brokers Andrew Paddick told Sunrise Exchange News brokers’ operating costs will rise steeply.

“Consumers will not receive any advice on personal insurances, as the provision of such will not be economical,” he said. “Instead they will be forced to buy ‘one size fits all’ policies on a non-advised basis, which will leave a percentage exposed to uninsured losses, which would have been identified in a proper advised sales environment.”

Mr Paddick says the current regulatory fees are many times those charged by the previous Insurance Brokers Registration Council.

“This is an extremely expensive, over-complicated, bureaucratic fudge. It would have been much easier to have had 10 industry commandments which those involved understood, and progressive penalties for breaking them.”