AIRMIC supports FSA move to improve broker transparency
AIRMIC has welcomed the news that the FSA plans to take further steps toward enforcing full disclosure of commissions by brokers. The regulator’s proposals, in the form of a discussion paper, are broadly in line with representations made by the association at the end of last year.
AIRMIC has repeatedly expressed concern at the lack of transparency among some brokers serving the SME market. Surveys have shown that, whilst the larger buyers enjoy a high level of disclosure, this is not the case with smaller companies. Apart from a desire to promote best practice, the association is concerned that these failings may creep back into the London market, where many of its members buy their cover. In its statement the FSA acknowledged that more work needs to be done in this area. “It is important that insurance buyers know what they’re paying for when they use an intermediary.”
“We remain concerned that for some buyers of commercial insurance this is not the case,” they stated. “Our discussion paper offers some potential regulatory solutions, but the door also remains open for an industry-led response.”
This view accords closely with AIRMIC’s call in November for a market-led solution to broker transparency.
The FSA are looking at three alternative types of solution:
- More rigorous enforcement of existing rules through a combination of further guidance and additional reporting requirements;
- An enhanced regime to improve quality of disclosure of commission (on request by the customer), services and status; and
- Mandatory automatic disclosure of commission.
The deadline for responding is June 25. AIRMIC’s Insurance Steering Committee will consider their position in detail at their meeting in May. Up to now, the association has stopped short of calling for mandatory disclosure as its first choice on the grounds that this would entail more regulation. However, Council has said that this might become necessary if other measures failed.
Chief Executive John Hurrell said that, at first sight, the second option appeared to be closest to AIRMIC’s historical position.
A senior FSA representative will take part in a debate about regulation during the Insurance Forum at this year’s annual conference in Edinburgh.
