Consternation is building in the Square Mile over additional fees
The latest, decidedly tepid, set of GDP figures show the economy has flatlined over the past six months. In such an economic context, any kind of organic growth will be an achievement in itself for brokers.
Hardly surprising, then, that brokers are being tempted to extract more cash from their insurer partners: it’s easier to squeeze the provider than the end customer, when margins are tight.
Aon’s ‘carrier charge’, the broker’s 3.5% top-up to its normal commission, is the just highest profile example of the service charges being introduced by brokers.
However, the rumblings of disquiet have been building up ever since Insurance Times revealed last year that Aon was lumping all of its service charges into a single payment.
The mutterings have been loudest in the Square Mile. New legal advice, prepared for the Lloyd’s Market Association by City law firm Reynolds Porter Chamberlain, indicates the choppy waters that brokers could be entering.
The advice, revealed exclusively on insurancetimes.co.uk, warns brokers and insurers that they may fall foul of FSA rules and the soon to be implemented Bribery Act if the former has been swayed by additional fees.
Some may dismiss the LMA missive and an earlier letter from Lloyd’s itself as sabre rattling by those with a vested interest in not giving brokers a bigger slice of a pie.
However, pursuing such a route takes brokers and insurers into tricky conflict of interest territory vis-à-vis customers. Lloyd’s concerns about safeguarding the reputation of the insurance market must be taken seriously.
Even in the current squeezed economic climate, the broking profession must demonstrate to clients that it has their best interests at heart.