BIBA rejects RICS demands

The British Insurance Brokers’ Association (BIBA) has criticised the Royal Institution of Chartered Surveyors (RICS) final report Transparency in professional fees for demanding brokers reveal their commission.

Eric Galbraith, BIBA Chief Executive, said: “The RICS has elected to take on the role of the FSA Designated Professional Body status for its members and is now trying to impose these conditions on the rest of the market.

“Whilst a number of our members, as part of their own business practices, already disclose remuneration automatically on all business, there is no need to make this mandatory and even less in the retail consumer market.”

“BIBA led the market in developing the FSA-endorsed Industry Guidance in respect of commercial customers and I believe there is no sensible case for mandating disclosure in the retail consumer market”.

Four good reasons

Steve White, BIBA’s head of compliance & training, said: “firstly, the consumer market for general insurance products is very competitive with brokers, aggregators and direct writers all vying for business and we can see no value in giving consumers another piece of information that they are unlikely either to fully understand or to be able to put into context.

“Secondly, RICS should have been aware of the disclosure requirements required of firms taking advantage of the Designated Professional Body exemption. Those requirements are deliberately and specifically applied and there is not a proportionate case for the FSA applying this across the piece”.

“Thirdly, BIBA has undertaken research with small SMEs which showed that only 2% of SMEs believe the amount of commission to be a very important factor in the buying process (compared to the 84% who thought policy cover, 67% total cost and 53% significant terms and conditions). There would seem therefore to be little benefit in mandating disclosure.”

“And lastly, we agree that the FSA should review the suite of disclosures given to retail consumers to ensure the information is relevant to their buying decision. However, our research suggests consumers have little appetite for information regarding commissions.”

The RICS recommendations were:

That the appropriate authorities should undertake to review whether there is consumer detriment in the consumer/ retail insurance market. Depending on whether there is detriment and its extent those authorities should look to take appropriate action.

That the FSA should be invited to review the current different approaches to disclosure of commission regimes that it operates. This information and lack of consistency should be brought to the attention of the EU.

That there should be greater emphasis placed on making sure clients, especially consumer clients, are made aware of the relevant remuneration, commission and any other payments paid through purchasing insurance.

That regulators should impose requirements to improve transparency in relation to insurance and that they should review the advice provided to clients, especially consumer clients, to ensure it is sufficiently informative and is provided to clients when needed.