The Financial Services Authority has warned insurance companies they face tough new rules to ensure they deal with claims more quickly.
Under the proposals being considered, the FSA will force insurers to deal with claims within a specific time frame. The plan already applies to life insurers, but represents a strict approach to general insurers.
FSA managing director John Tiner said there is "evidence" that insurers claims records are poor. He added: "There is evidence that standards need to improve and we are looking at imposing rules to ensure standards get better."
However an ABI spokesman warned: "It is important any new rules benefit the consumer and are proportionate."
The FSA hopes the changes will simplify regulation because insurers will no longer have to deal with both the ABI and GISC. However analysts fear the penalties will be harsher as a result.
Any changes will not take effect for two years until the FSA takes control over general insurance.
