Will the EU Commission force the FSA’s hand on mandatory disclosure?
As the FSA continues to review commission disclosure and the issue of conflict of interests, the European Commission is continuing its review of the Insurance Mediation Directive (IMD).
The IMD review is expected to be announced next year and could effectively pave the way for a final decision on commission disclosure.
The FSA has said that the timing of its further work on commission disclosure will take in to account any developments in Europe regarding the IMD review, which could ultimately overrule any future findings of the FSA.
Even if the FSA decides against mandatory commission disclosure, it could be forced to require full disclosure if the European Commission rules in favour and changes the Insurance Mediation Directive.
Ian Mason, head of the financial service regulatory team at Barlow Lyde & Gilbert, thinks the Commission could step in. He said: “They are looking generally at the insurance industry and they would be quite interested in issues like conflicts of interest too.
“It is a little bit wait and see but it is an area that they have been making noises about for quite a long time.”
In the European Commission’s final report in its inquiry into business insurance competitiveness published in September, the commission expressed concern over the lack of remuneration disclosure, particularly in relation to commissions. It said there was a lack of transparency that could undermine fair competition and may create conflicts of interest.
Although the commission did not make any changes to commission disclosure, it called for an industry appraisal of its practices and said remuneration transparency would be considered during the review of the Insurance Mediation Directive.
Andrew Paddick, director general of the IIB, said: “In my view, we must keep an eye on and dialogue with the EU Commission as the Insurance Mediation Directive comes up for review, because most European markets are largely insurer and tied agent controlled, which could result in proposals for change not favourable for independent brokers.”
