A new survey into broker remuneration reveals a widespread desire among corporate insurance buyers for greater transparency.
The survey, which was conducted by Insurance Research and Strategy on behalf of the International Underwriting Association and Lloyd's Market Association (LMA), reveals that more than two-thirds of clients want to know brokers' total income levels.
Commission estimates are about 50% of the actual figures, revealing that clients are largely ignorant of brokers' commission levels. More than 500 corporate insurance decision makers were interviewed as part of the survey. There was a clear majority in favour of mandatory disclosure.
Andrew Kendrick, chairman of LMA, said: “Here is independent testimony that commercial customers firmly believe that full transparency is the right solution to broker remuneration. Mandatory disclosure of broker commissions is the right way forward and will enable the market to operate competitively.
“We urge the FSA to take the necessary action to ensure disclosure — and resulting transparency - becomes an automatic process.”
Larger firms (with turnover between £250m to £400m) and those employing risk managers were much more aware of commission levels and also more likely to favour mandatory disclosure of commission.
Despite their desire for more transparency, the survey suggests that most buyers of commercial insurance do not believe that brokers' commission arrangements compromise the service they provide.
