FCA wants to make sure wholesale broking market ‘is working well’
The FCA has launched a market study into competition in the wholesale broking sector.
The regulator said with the market study, it wants to ensure that the sector “is working well” and fosters innovation and competition in the interests of its diverse range of clients.
The FCA will examine:
- How brokers compete in practice and whether they use their bargaining power to get clients a good deal.
- Assess what conflicts of interest exist, how they are managed and how they affect competition and client outcomes.
- Examine how broker conduct impacts on competition in the sector.
The FCA has published a terms of reference document detailing the areas it will explore and has asked for responses by 19 January 2018.
It plans to publish an interim report on the study in autumn 2018 which will set out its analysis, preliminary conclusions and any potential solutions to address concerns.
The FCA said that there have been “significant changes” in the wholesale insurance sector in recent years, which has led to brokers developing new services and business practices.
It said: “The FCA plans to explore how competition is currently working and whether it could work better.”
The regulator noted that the London insurance market is one of the world’s leading centres for large scale, complex commercial and special risks, and controls more than £68bn of gross written premium.
FCA executive director of strategy and competition Christopher Woolard said: “Given the size of the wholesale insurance sector and the type of large scale risks it covers, the way it functions can have a wide-ranging impact on the broader economy.
“If businesses cannot get appropriate cover or pay more for services than they should, it can impact on their ability to operate and grow.”
He added: “Brokers play an important part in the wholesale insurance sector ensuring clients get appropriate coverage at good value. However, following significant changes in the sector, we are looking at the dynamics to ensure competition is working well.”