I have read with further dismay of the submission by Lloyd's over commission disclosure (13 March, Insurance Times). I suppose I shouldn't be surprised as Lloyd's will always promote an agenda to protect and advantage itself.

The FSA appeared to have already taken into account, quite properly in my view, that commission disclosure was not necessary in respect of protecting the public. Lloyd's has set up a closed shop over capping commissions to 30%, which some might argue is generous, but probably masks in many cases excessive underwriting costs.

I strongly represent that declaration of commission is an erroneous and meaningless flag to the customer, when what is of the most importance to the customer is the competitiveness of premium and the cover.

In addition, declaration of commission is not a level playing field when comparing direct sale operations from underwriting insurers to commission-remunerated intermediaries.

Further, where a scheme is involved, the scheme promoter or administrator carries out all of the marketing sales and cost of acquisition including paying for the literature, probably all the costs relating to website operations, full turnkey service administration and often claims.

In these circumstances, to the public, a large commission would look suspicious and a perceived negative, even though what actually counts is whether the customer is paying a competitive premium.

Scheme operators are usually pretty good at containment of risk, providing appropriate specialist cover and hammering out efficiently-costed underwriting rates that benefit the customer overall.

Declaration of commission is a minefield that favours direct insurers and protects underwriting interests that want to charge excessively for their underwriting at the expense of everyone else's costs, and especially the cost to the end user.

I urge the FSA to continue to reject this and concentrate on pricing, on competition and market forces, where the customer makes his decision based on price, service and cover.

This is the only level playing field that can be set to cover all interests within the orbit of the new regulations.

Andrew Selby
Managing director
Pavilion Insurance Management

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