New Toba wording could head off FSA's mandatory disclosure threat
Biba is optimistic that its proposal to incorporate clients' right to commission disclosure in brokers' terms of business agreements will head off the FSA's threat of mandatory disclosure.
The trade body is expected to make the wording available to members this week. This would remind commercial customers that they are entitled to ask brokers about the level of commission received from underwriters.
This follows similar moves by the LMBC for Lloyd's brokers.
Steve White told Insurance Times that it had received positive feedback from the FSA on its plans. "We have had an exchange with the FSA and believe it will make positive reference to the proposal. The indication is that it will be sufficient to remove the threat of commission disclosure."
He urged brokers to follow Biba's lead saying: "Brokers need to do it. If the FSA believes the market isn't doing it, it will mandate commission disclosure."
The FSA has warned brokers that it would introduce mandatory commission disclosure if the market did not satisfactorily address the management of conflicts of interest.
In a speech in March, FSA chief executive John Tiner highlighted the LMBC's "efforts" saying that market-led solutions were "preferable".
An FSA spokesman would not comment specifically on Biba's proposals but warned that commission disclosure did not necessarily remove any conflicts of interest. "We will keep an eye on what the industry is doing."
Biba challenge to FSA
Biba is undertaking consumer research in a bid to challenge the FSA's decision to remove the requirement for insurers to provide status disclosure and demands and needs statements to retail customers.
The trade body claims the regulator's move, which came into effect last month, will confuse consumers. Many customers do not know the difference between a broker, such as AA Insurance, and a direct insurer such as Esure. Biba has begun research to determine the level of consumer misunderstanding.
Steve White, regulation and compliance manager at Biba, said: "We would like our research incorporated into the FSA's effectiveness review."
EU urged to consult UK brokers over competition
Biba chief executive Eric Galbraith is urging EU competition commissioners to consult UK brokers after they have finished gathering data for the business insurance review.
Last year the EU announced it was concerned that competition is not working as well as it should within the commercial sector. At the time, Biba slammed the review, claiming it was unnecessary, since the UK was already highly competitive.
But, Galbraith says keeping the lines of dialogue open is essential. "They will try to find something. For us to counter this, we must demonstrate what we do and show the diversity of our marketplace. The model in the UK is the one to emulate."
He said Biba would co-ordinate its response to the review through BIPAR, the European Federation of Insurance Intermediaries. "We have a strong intermediated channel in the UK and this benefits consumers. I want to avoid the market being damaged by this and there is already some threat to capital moving to offshore locations."
It is understood the EU Commission has sent out questionnaires to a number of parties throughout Europe. In the UK, these include Biba and a number of larger brokers and insurers.