The FSA is publishing a discussion paper on transparency of information in the commercial insurance market.
In December 2007, the FSA published a report that considered whether commission disclosure earned by commercial insurance intermediaries should be made mandatory.
The report found that commission disclosure on its own was not justified on cost benefit grounds but it raised concerns about market inefficiencies and the FSA announced it would publish a DP looking into this area.
The DP examines the conditions necessary to ensure an environment that encourages market efficiency.
Central to this is that buyers have access to clear, comparable information about the role of the intermediary including their services and the way they are paid.
Director of retail policy and themes Dan Waters says: “It is important that insurance buyers know what they are paying for when they use an intermediary. We remain concerned that for some buyers of commercial insurance this is not the case.
“Our discussion paper offers some potential regulatory solutions, but the door also remains open for an industry-led response.
“In light of the increased blurring of the distinction between insurers and intermediaries the DP also examines the need for firms to ensure they properly manage conflicts of interest.”
The DP will consider three options for addressing these concerns – a more rigorous enforcement of existing rules through a combination of further guidance and additional reporting requirements, an enhanced regime to improve quality of commission disclosure, service and status and mandatory automatic disclosure of commission.
The closing date for the paper is June 25, 2008. Feedback will help inform the decision about whether to make changes to FSA rules. If new rules are required, they will be consulted on in Q4 2008.