Money well spent or down the drain?
The industry fought long and hard to stop the regulator implementing a mandatory disclosure regime – and it won. But this latest information obtained by Insurance Times via the Freedom of Information Act reveals the expense that the FSA incurred over more than two years in coming to a decision that the majority of the broker market would have settled for from the start.
“How much?” was the response of one broker at the amount of money poured in to the commission disclosure review by the FSA. “Most of the money was spent on a report which suggested there should be another report,” said another.
But however you react to the £800,000 cost of the FSA’s review of ‘Transparency, Disclosure and Conflicts of Interest in the Commercial Insurance Market,’ you can’t help but think ‘what if?’ What if the review had led to the FSA introducing new rules for brokers to disclose their commission earnings? The cost to brokers would have far outweighed the benefits. The cost of the FSA’s review would have been likely to have been more expensive too. So there are many positives for brokers to consider, and many people to be thankful to, such as Biba.
When put in to context with the amount of money that is put in to regulating general insurance, the £800,000 spent on the review is a fairly insignificant proportion. But it gives the market a fair idea of how the FSA is using its money.
“It just sounds like a lot of money,” according to one broker. “If the FSA had listened to Biba earlier it might not have needed to cost £800,000. It is a lot of money for an exercise that I would question did not have to be done in the first place.”
The FSA may never get it right in the eyes of insurance brokers, but it could mean that the cost of regulation just got much more interesting.