FSA report says “tight demand conditions” could be the reason for the drop off
The number of general insurance intermediary firms dropped 5% in the second half of 2011, an FSA report says.
The FSA said the drop off might be due to “tight demand conditions”, according to the 2012 Retail Conduct Risk Outlook.
The good news for brokers is that revenues remained resilient, largely thanks to rising premiums and products sold via the internet.
Last week, it emerged that insurers are tightening their belts, with recruitment falling.
The report says: “Revenues for GI intermediaries, however, have remained largely resilient partly due to increasing premiums and more products being sold via the internet. The majority of retail insurance purchases continue to be compulsory products such as motor and buildings, and discretionary core products such as contents and travel insurance.”
The report also warns that brokers will face scrutiny over how they sell add-ons.
The report says add-ons are an emerging risk. It adds: “It is sometimes the case that there is little profit margin in the primary general insurance product, so firms supplement their income through add-on sales with a high profit margin, some of which will historically have been included in a standard policy.
“Firms might therefore incentivise staff to pressure sell or to automatically include the add-on without explaining the cover properly or that it is optional.
“When products are bundled in this way it is not easy for consumers to understand the overall cost and value of the product to them.”
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