Risk managers shrug off broker conflict of interest concerns

Brokers have done such a good job of telling clients what they do that risk managers are far less concerned about broker conflicts of interest than they were a year ago.

An annual survey by risk manager trade body Airmic found that just 8% picked “broker conflicts of interest and remuneration models” as one of the 15 aspects of the market that concerned them the most.

The figure is a sharp drop on last year, when 42% of risk managers said it was one of their top five concerns.

Airmic chief executive John Hurrell told Insurance Times: “Last year there was a lot going on in the broker market such as new broker driven capacity and a growing awareness about broker ‘fees for services’ into the insurance market.

“But that has all settled down and brokers have done a good job of communicating to their clients about what they are doing. Obviously that has worked as clients are, for the most part, satisfied.”

One of the deals that sparked a lot of debate about conflicts of interest last year was when Aon launched a Sidecar agreement with Berkshire Hathaway. The deal means that Berkshire Hathaway automatically underwrite 7.5% of the risks Aon places into Lloyd’s.

Lloyd’s finance director Luke Savage warned the arrangement would undermine the expertise within the Lloyd’s market, against clients’ interest.

But Aon president and chief executive Greg Case has said the premium placed by Aon clients in Lloyd’s actually increased by 3% in 2013, which is actually 5% on a like-for-like basis when the reduction in certain lines due to trade sanctions is factored in.

Meanwhile, a survey of 1,000 small business owners conducted by the FCA found that less than 1% asked to see how much commission their broker received from insurers. More than half said they were not concerned about how much their broker was paid by insurers.

Airmic’s survey was completed by 110 risk managers.