Former Primary Broker Services chief says there must be 'clear blue water' between a firm's MGA and broking arms
Keychoice Underwriting managing director Jonathan Davey has hit out at brokers owning managing general agents (MGA), saying that there must be clarity between the ownership structures.
Davey’s blast comes a week after he revealed to Insurance Times the insurers backing his new commercial MGA, owned by technology provider SSP. (Inter Hannover, the UK branch of German reinsurer Hannover Re, Zurich and MMA Insurance are the new proposition’s three major supporters.)
In a separate attack, Davey said that MGAs would only survive if they set out to write profitable business.
He said he was stunned that the FSA had not queried the role of brokers acting as underwriters and stressed “we are not a broker-turned-underwriter”.
“Your legal and moral responsibility as a broker is to your client. And your legal and moral responsibility as an underwriting agency is to make money for insurers.
“How you square the circle of being both amazes and eludes me; they are diametrically opposed.”
Davey said there needed to be “clear blue water” between the management structures of a firm’s MGA and broking businesses.
“If you own your own MGA and broking business, it’s a very good way to hide where commissions are truly being added,” he said.
He said that provided it remained best advice – or that it “Treated Customers Fairly” – putting a piece of business as a broker with an MGA that you owned did not commit any offence or breach any moral code.
“But if I were the regulator, I would be looking to make sure that was well-proven in every case.”
Davey said that Keychoice Underwriting would deliver profitability for insurers “because that’s what we’re here to do”, and hit out at businesses that targeted volume.
“It’s no longer good enough to say ‘I’ve got a great amount of volume’. You need to be writing profitably or it is useless.”