Brokers have threatened to stop providing services for insurers, such as claims handling, if commission disclosure becomes mandatory.

Such a move could force insurers to take such services in house - which may prove difficult.

The FSA has signalled it will force brokers to disclose commission rates in 2006 if they fail to show effective handling of conflicts of interest.

One broker said handing back services to insurers would "level the playing field" among brokers who would end up competing on price alone.

Another broker, who did not wish to be named, said: "It is inevitable that we will have to pull some of our insurer services. We just couldn't maintain our relationships with insurers if we had to make commissions transparent."

The broker added: "I don't think they [insurers] could cope with taking those services back."

Stuart Reid, chief executive of Stuart Alexander, said: "If commission disclosure came in it could undermine broker relationships with insurers. Conflicts of interest are important, we just have to make sure we are managing them effectively."

AXA head of compliance Ian Holloway agreed that if brokers stopped offering additional services it could lead to consumers choosing a broker on price alone. "A market driven by price is not in the interest of the client," he said.

He added that AXA would be "slightly uncomfortable" with disclosure.

"The industry has been working hard to comply with the regulator in the first year. What we need now is to pause and, via the ABI and the various broker bodies, move the debate forward."