Michael Faulkner says it is time for the FSA to resolve its stance on commission disclosure and move on

In October last year, John Tiner, then chief executive of the FSA, announced that the regulator would be commissioning a forensic review into the possibility of mandating commission disclosure.

At the time, Tiner said that the industry’s own attempts to improve transparency were moving at a glacial pace and were unlikely to lead to a solution any time soon. As such, the FSA had to consider whether to step in and impose its own solution.

The FSA’s consultant began its assessment, and the insurance industry braced itself for the inevitable.

A year later and the FSA is back where it started. The consultant found that, while there was a limited market failure, the benefits of mandating commission disclosure would not out-weigh the cost of doing so.

The regulator has this week ruled out mandatory disclosure at the current time, but announced it would be undertaking a further programme of work focusing on commission transparency.

This will include looking at the management of conflicts of interest and methods of raising customers’ awareness of commission information.

Brokers and trade bodies have expressed frustration that the commission disclosure question has not been resolved.

Certainly, the programme of work announced by the FSA has a feeling of déjà-vu about it.

The management of conflicts of interest was an issue that the regulator was looking at two years ago. And the question of raising customers’ awareness of commission information seems to be revisiting the type of solutions that industry bodies such as Biba were looking at last year.

It is not surprising that the insurance industry feels so much frustration with the FSA, when the regulator could have arrived at this point last year.

The fact that the threat of forced disclosure still hangs over the insurance industry will only serve to infuriate the market: the regulator should make up its mind and move on, not shilly-shally around with thematic reviews and further investigations.

The wider problem for the industry and the FSA is that the European Competition Commission’s work on anti-competitive behaviour in the commercial insurance market has its sights on commission transparency.

The concern is that mandatory disclosure may be forced upon the industry from Europe in spite of what the FSA may eventually decide.

What is certain is that the commission disclosure debate is still very much alive and kicking.