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OFT to examine indemnity claim

The Office of Fair Trading is looking into whether life offices have collaborated to raise indemnity commission discounts simultaneously.

The investigation follows a complaint by Berkeley Morgan chairman Jon Pardoe, who has hit out at what he believes is price fixing by life offices.

If IFAs choose to receive lump-sum commission upfront, life offices can charge a percentage each month. Pardoe says a number of providers have raised the indemnity commission discount rate to 1 per cent from 0.75 per cent in the last 12 months.

In 1987, Lautro imposed maximum commission levels on products and a 1 per cent discount factor each month. This rule was overridden in 1989, after which a large number of providers reduced the discount factor to 0.75 per cent.

Pardoe says recent increases in indemnity commission discounts will see his network members lose £250,000 a year.

He says: “It is quite clear that these companies have all worked together as a cartel.”

OFT press officer Mark Kram says: “The department is looking at life office moves to raise indemnity rates.”

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