Tom Broughton comments on the FSA's obsession with commission disclosure.
The quarterly mergers and acquisitions’ round up on pages 8-9 paints a broad picture of how broker consolidation has dried up in recent months. It is unlikely that we will see a return to the intensity of the land grab we saw at the end of last year, given the economic downturn. As a result, the burning issue of insurers owning brokers on a wide scale has failed to materialise, and so the regulatory implications have slipped down the agenda. The FSA, however, is still determined to make a problem of this issue at nearly everyone’s expense through the guise of its marathon review of commission disclosure. An independent consultant looked at this issue when the acquisition frenzy was in full flow last year and concluded to the FSA that the market was far from failing. However, it appears that this wasn’t the answer the FSA wanted to hear and it pressed on with a further consultation, lumping in the issue of ownership strategies, the role of consolidators and general transparency.
Six months on and with consolidation stalling, it has become clear that customers are not getting a raw deal at the hands of convoluted market structures after all. So where does this leave the FSA? For a start, a little bit behind again. The FSA has tried to predict the turn of the market and then review it before the situation has actually materialised. The intermediary market is largely healthy and insurer-owned brokers generally have a diverse mix of carriers. Second, and crucially, it has left this thorny issue of mandatory disclosure in the air once again. It is getting a little bit embarrassing now for Biba and the IIB to keep knocking on the FSA’s door making the same argument time and time again, especially when they believe they have won the argument already. The ABI is even taking the issue to the corridors of power within Whitehall. So the FSA is now just not listening. Privately, there is a suggestion that it will look to a market led solution as an alternative, but it keeps repeating that it wants more feedback from company bosses rather than the lobby. The FSA’s industry consultation ended this month so it is now time to reflect on its findings again and end this uncertainty for good. Let’s just hope it comes to the right decision and that we don’t have to go through this argument all over again. IT