Regulator insists that threat of mandatory disclosure remains as consultation ends.
The FSA said it still favours an industry-led solution to the ongoing debate around whether brokers should be forced to reveal how much commission they earn, as its consultation on the matter closed this week.
Matthew Browne, senior associate at the FSA, told the Airmic conference in Edinburgh that an industry solution remained the regulator’s preferred option. Other options included further regulation, or stricter enforcement of the existing regulation by the FSA.
“It is not for us to make a decision about the form and function of an industry solution, we are there to help facilitate and encourage it but certainly not to define the outcomes,” he said.
“If we can find a way of being able to develop a credible approach which would be led by the industry, that certainly would be the focus for our attention.”
However, he insisted that the threat of mandatory disclosure still exists. “We know that there are difficulties in getting hold of commission information and, where we need to find a final solution to rectifying any problems that are apparent in the market, making commission disclosure mandatory might still be the only way of finally achieving transparency. So we keep that option open.”
Biba has taken the lead in developing an industry-led solution. The trade body, which has already begun developing a market solution with its members, is now calling for input from the wider market.
Steve White, compliance and training officer at Biba, said he will meet the FSA soon. “The work we are doing is on gathering support and then hopefully we will go to the FSA and say what we are proposing has the support of the majority.
“Sooner or later we need closure on this issue,” he added.
The consultation on transparency, disclosure and conflicts of interest in the commercial insurance market, released in March by the FSA, gave the market until 25 June to have its say on how commissions should be disclosed. Following Biba’s fomal response to the paper on Monday, Eric Galbraith, Biba chief executive, said: “We strongly support building on the current rules to achieve an industry solution.”
The FSA will review the responses over the summer, and carry out further customer research before issuing its final consultation, on the form of any new regulation, in the fourth quarter of this year.
An FSA spokesman said the regulator had received a good response to the paper as Insurance Times went to press, but added that it expected a late surge of responses. “We have had a variety of responses from across the industry,” he added.
Earlier this month, Grant Ellis, chief executive of the Broker Network, wrote to 2,500 brokers urging them to send letters to MPs in an attempt to lobby parliament on the issue. The network has since submitted its response to the FSA.