Insurers have authorised a secret report into commission disclosure so they can combat any Financial Services Authority (FSA) bid for transparency.

The FSA has made clear that disclosure of commission would be a key topic in its development of a general insurance intermediary regulation regime, with a heavy leaning toward transparency.

Meanwhile, the Treasury is expected to launch a consultation paper on commission disclosure in the coming months, which will further mould the FSA's stance.

An insider said there had been considerable infighting within the insurance industry on whether transparency is favourable or not, pushing the ABI into settling the argument with independent research.

"The ones who are most concerned are the extended warranty and travel insurance sellers and, as the ABI also represents them, they need hard evidence if they're not going to back them with the FSA," the source said.

In a letter to members, ABI general insurance manager John Parker says: "We expect the FSA to begin policy work in the autumn and it's therefore important that the ABI has a fully worked-up and credible position by then".

The ABI has levied its members £0.004 per every £1,000 in gross written UK premium income to pay consultants for the work, which is expected to finish in September.

The research will include "mock sales scenarios" with focus groups to ascertain what would happen if commission were disclosed at the point of sale, interviews with distributors and insights from the life and pensions regime.

Parker said the research was designed to find out whether commission disclosure was important to consumers.

He said those members who did not want transparency had both philosophical and practical concerns.

"One is that there are a lot of things you buy where the make-up of the gross price is not disclosed. So why should insurance products be any different," he said.

"A practical concern is that if you do require disclosure, you have to have a level playing field between mediated and non-mediated business. And that could be incredibly prescriptive."

Royal & SunAlliance marketing and distribution director Brendan McManus, who is on the ABI committee that commissioned the research, chose his words carefully when commenting on transparency.

"I think there are positives and negative. That's why we're committed to doing this research to find out how the customer reacts," he said.

However, Allianz Cornhill regional commercial lines executive Bob Eveleigh said there was a lot of unnecessary concern over the disclosure of commission.

He said much business was already conducted on a fee basis and more was heading in that direction, rendering commission arguments pointless.

"I doubt that customers will be surprised at the standard rates of commission," he said.