In connection with MG Tattersall (Letters, 27 April) regarding commission disclosure, first, I would point out that I am in favour of maintaining the status quo, insofar as commission does not need to be disclosed, unless specifically requested by the client.
Whether this situation changes in the future is a decision which will need to be considered by the FSA, following consultation with the industry. I am certain that, if compulsory commission disclosure comes about, this will change the whole landscape of the broking market, possibly beyond all recognition.
However, I feel that Mr Tattersall's comments require response. Except in respect of personal lines business and very small commercial business, the broker does have significant influence over the end premium which is quoted by the insurer. To say that this is not the case is simply not factual.
Furthermore, the commission levels can often be significantly negotiated by the broker, either down or up, depending on what is required in respect of the particular policy.
Finally, as brokers, we are acting as agent of the policyholder - and not as a retailer. We are not selling our own policies, we are the intermediary between the client and the insurer. Therefore, to disclose commission to the policyholder is not unreasonable because the client is paying us to handle his insurance affairs.
If that commission is insufficient for the work being undertaken, then the broker should consider adding a suitable (fully disclosed) fee in addition, or instead of, the commission. For smaller brokers to survive in the medium to long term, I would suggest that they need to ensure that each client is paying its own way in terms of commission/income.
When the time comes for commission to be volunteered to the client - and I am sure that this time will come - the larger clients who have policies which include commission will automatically endeavour to negotiate this down. Many clients will be successful in doing this.
Compulsory commission disclosure would certainly change the future of our industry and, like all aspects of any changes to the industry, it will only be the brokers who pre-empt such changes by addressing the potential knock-on effects, who will eventually survive.
Name & address withheld
