When a broker recommends an insurer to a client, the client has every right to expect that the broker has surveyed the market to come up with best-value cover.
To most that would mean scouring the …
When a broker recommends an insurer to a client, the client has every right to expect that the broker has surveyed the market to come up with best-value cover. To most that would mean scouring the market for a combination of suitable covers at competitive prices. However, for some brokers it means recommending the insurer that pays the broker the most without regard to best value for the client. Well that's what New York attorney general Eliot Spitzer reckons. And now he's suing March & McLennan in the US for steering clients to insurers that paid Marsh the biggest "contingent commissions".The value of UK insurance stocks fell on the news, as most reckon that a similar investigation will be undertaken in the UK. First in the firing line have to be our international brokers and then Benfield shares were under pressure. Next come our Lloyd's insurers, who supply billions of pounds of premiums to the US through the international brokers. Finally, it is likely that there will be a look at practices in the UK.Aon and Marsh in the UK both admit that they use premium service agreements. These are payments made by insurers above the usual commissions, but importantly the brokers say that these extra payments are transparent. They argue that the clients know what is going on and can take this into account when deciding to choose their insurers. Does this give best value? It really depends on the awareness of the clients and as we all know this can be variable.
Heading the ABIWho should be the new leader of the ABI? With the director general job and the head of general insurance up for grabs, there could be a huge change in the way the ABI is run. I favour a return to some core competencies. So instead of recruiting more civil servants, why not hire some insurance industry people - secondments could get around the problem of the ABI not being able to afford some of the best talent. What do you think? Write to me at andy.cook@-instimes.co.uk it