The FSA has yet to make its mind up on commission disclosure

The FSA’s review of broker commission disclosure has now moved on to the next stage.

The regulator is looking at whether brokers should be forced to disclose theirs commissions up front.

The consultancy firm CRA, which is undertaking the review for the FSA, has asked a selection of brokers to provide detailed comment on he cost of implementing each of four proposed models.

These are:

Scenario 1: mandatory disclosure of existing requirements to customer.

Scenario 2A: mandatory disclosure to customer of total remuneration received by the primary broker in cash value as well as the maximum possible value of any other remuneration.

Scenario 2B: as 2A but includes mandatory disclosure to insurer. Non-primary brokers also required to "facilitate" transmission of information.

Scenario 3: as 2A but includes disclosure of remuneration of brokers throughout the chain.

Remuneration includes contingent commissions, premium finance and any services provided to an insurer, but excludes fees.

The feedback from brokers will play a key part of the cost/benefit analysis that CRA is undertaking for the FSA.

It does not mean that mandatory disclosure is inevitable. Only if the benefits of mandatory commission disclosure outweigh the cost of doing so it will the FSA go down that route.