No disclosure requirement for retail customers n Level playing field needed on commission disclosure
Biba has blasted the FSA over its handling of commission disclosure for retail customers, describing proposals to reform the regulations as “ludicrous”.
The trade body hit out at proposals contained in the regulator’s consultation paper on the sale of insurance products, published late last month.
The paper on the Insurance Conduct of Business (ICOB) rules, proposes not to change the disclosure rules for retail customers. This means brokers will not be required to disclose commission to the public, even if asked.
Steve White, head of compliance and training at Biba, said: “In the commercial market, they [the FSA] are looking to force brokers to disclose commission. It is ludicrous. All customers should be on the same level playing field. These proposals dig up that playing field.”
The FSA is currently looking at whether there is a need to impose commission disclosure in the commercial insurance market.
The regulator will consider regulatory intervention if market failure analysis and cost/benefit analysis tests are met.
Consultants CRA International, who have been appointed by the FSA to look into the subject, will publish the investigation’s findings in the last quarter of 2007.
The FSA would not comment on whether it was hypocritical to fail to require disclosure for retail customers, while demanding disclosure for commercial clients.
But, Lyndon Wood, chairman and chief executive of Moorhouse Insurance Brokers, said: “If the FSA is going to insist on disclosure of commissions or go to a fee structure then we should be on a level playing field across all insurance products, regardless.”
Grant Ellis, chief executive of Broker Network, added: “Every client should be entitled to ask and entitled to know.
“If it is not necessary for individual retail customers then why should it be necessary for the more sophisticated buyers of insurance?”
Under the common law of agency every client is entitled to know, upon requested, what remuneration is earned by brokers.