Trade body submits response to FSA on mandatory disclosure.
The Institute of Insurance Brokers has found that there is virtually no demand amongst the ‘middle segment’ for mandatory commission disclosure, based on the experience of its members.
In a statement, the trade body said that since the CRA report indicates that there are no substantive market failures in the micro-enterprise and large corporate customer sectors, this would suggest that there is no case for compulsion, although business customers already have the right to request commission details, where they are interested.
Barbara Bradshaw, IIB chief executive, said: “There is already strong competition within the business insurance sector; most buying decisions are made on the basis of overall cost and service.
"The case for mandatory disclosure, and its associated costs, simply has not been made. All that would be achieved is to increase expense for businesses and their customers; at a time of inflationary pressures from energy and basic materials, it is essential that business’ costs are not further increased."
IIB considers that mandatory commission disclosure could unsettle the UK insurance market and could lead to further strengthening of the insurance company’s domination of the market.
“This is not in the interests of customers in any sector,” added Bradshaw. “The efficiency of the UK insurance market depends on the ability of brokers not only to advise customers on their insurance needs, but also to use their professional knowledge to select the right insurer.
"If regulation is skewed against independent advisers and in favour of the already powerful insurance company lobby, competition will reduce and insurance premiums increase. This cannot be what the regulators intend.”
The statement added that IIB members reacted with dismay to the inference that mandatory commission disclosure might still be imposed despite the CRA report.
It said that if the arguments for compulsory (or substantially more detailed) disclosure of remuneration were upheld, the potential impact on the UK distribution model would be considerable.
