Brokers say meaningful response impossible and guesswork needed
Brokers have slammed the FSA’s review of mandatory commission disclosure , saying the questionnaire is impossible to complete.
The FSA is currently conducting a cost benefit analysis to determine whether brokers should disclose their commiss-ions up front.
The consultancy carrying out the work, CRA, sent questionnaires to a number of brokers requesting accurate cost estimates of four commission disclosure models (see box).
Kedric Rhodes, managing director of Ten Insurance, said he would have been guessing if he had attempted to complete the whole thing. “After about one page I gave up and decided it was rubbish. We could spend a week on this and still not come up with meaningful figures.”
Rhodes said he had been asked only twice in 40 years how much commission he had earned. He raised concerns over how much it would cost to change the system to allow for a new procedure.
He also said the different scenarios were “difficult to understand” and he questioned scenario 2B, which would see brokers disclosing two sets of figures to the client and insurer, claiming the insurer would already know this.
Bryan Whicher, account executive at Oamps, said: “There is just no way I can come up with all this [information] because I do not have the time. It presumes that brokers have very little to do in the day.”
He said that the different scenarios would be complicated and that the FSA might have already made a decision.
The feedback from brokers will play a key part of the cost/benefit analysis being undertaking for the FSA. But mandatory disclosure is not inevitable. The FSA will take that step only if the benefits of mandatory commission disclosure outweigh the cost of doing so.
An FSA spokesman said: “The survey response is as we anticipated and we are happy that the evidence it provides would be adequate to support the objective analysis by CRA .”
The four disclosure models
â€¢Scenario 1: mandatory disclosure of existing requirements to customer
â€¢Scenario 2A: mandatory disclosure to customer of total remuneration received by the primary broker in cash value as well as the maximum possible value of any other remuneration
â€¢Scenario 2B: as 2A but includes mandatory disclosure to insurer. Non-primary brokers also required to "facilitate" transmission of information
â€¢Scenario 3: as 2A but includes disclosure of remuneration of brokers throughout the chain.
Remuneration includes contingent commissions, premium finance and any services provided to an insurer, but excludes fees.