United Kingdom car dealers have less than a year to comply with new insurance regulations or face being unable to sell insurance, the Retail Motor Industry Federation (RMI) has warned.

From 14 January 2005, insurance sales are to be regulated, and those that sell insurance will need to enrol with the Financial Services Authority (FSA). The new rules cover extended warranties, credit protection insurance (CPI), GAP insurance, and general motor insurance.

Dealers will need to reach standards set by the FSA and pay an annual fee to qualify for registration.

An RMI spokesman said: "Dealers derive a great deal of their profits from the sale of insurance, and a large chunk would be at stake for those that fail to register, so they should act now to make sure they are ready for the new regime."

The regulation of insurance mediation will allow the implementation of the European Union's Insurance Mediation Directive (IMD) in the United Kingdom. This is intended to standardise the insurance selling process, and set standards for the sector.

Dealers that do not register could find their access to the insurance market restricted. The RMI added: "Those that do not register, or do not meet the standards required, will only be allowed to be an insurance introducer. This would mean they could only display leaflets, and would be prohibited from influencing a customer's insurance-buying decisions."

"Up to half of dealer profits can derive from the sale of insurance products, and most would hate to lose it as a source of income."