Brokers and insurers should respond quickly to FCA’s add-on remedies, says accounting firm Moore Stephens
The FCA’s proposed overhaul of the add-ons market could push up premiums as brokers try to recoup lost revenue through higher commissions, a senior accountant has warned.
Accounting firm Moore Stephens’s insurance industry group director Alexander Barnes said: “The FCA’s proposed changes may well make it harder for brokers and indeed insurers, where insurers sell directly, to sell add-on products.
“Many insurance intermediaries rely on the add-on product revenue. So they will need to re-visit their business models, considering the level of revenue they get from insurance through brokerage and commissions.
“This could affect brokerage rates charged, which would have a knock-on effect on premiums. It may also result in a re-balancing of focus on add-on products. Ultimately it should mean the consumer is better-informed, but it does mean the pricing of products may need to be to be re-visited.“
He added: “The knock-on effect could spell the end of ultra-competitive introductory premiums, and increase insurance costs for consumers.”
On Tuesday the FCA proposed remedies for the add-on market after the completion of its thematic review into the area.
The proposed fixes included a ban on pre-ticked boxes, mandatory publishing of claims ratios and breaking the point of sale advantage for motor guaranteed asset protection (Gap) insurance.
Barnes urged brokers and insurers to react quickly to the planned changes.
He said: “As a matter of urgency insurance brokers and insurance companies should respond to the FCA’s proposals, which will have a dramatic impact on their businesses. Sales practices and approaches will need an overhaul and firms will need to address their business models, particularly if insurance premiums do not react quickly.”