Hardy raises concerns over insurer 'inducements' for brokers
Lloyd's has begun investigating the use of placement service agreements (PSAs) in the market.A Lloyd's spokeswoman confirmed this week that Lloyd's was compiling a report on the use of PSAs."The FSA is regulating this but we have an interest from a transparency point of view. We are gathering information and will report in due course," the spokeswoman said.Hardy Underwriting chairman Peter Hardy this week re-ignited the controversy about the "worrying" use of PSAs.PSAs, also known as premium service agreements, are deals between brokers and underwriters whereby brokers generate extra fees in exchange for producing premium volumes to underwriters.Hardy highlighted the subject in the company's annual report."The incidence of so-called placement service agreements is worrying and we are hopeful that the public controversy arising currently in the US will serve to make them less attractive in the UK," Hardy said. Earlier this year, the Washington Legal Foundation called on the attorneys general of New York and California to investigate the use of PSAs. The foundation said the use of PSAs encouraged brokers to steer clients to insurers that would profit the broker rather than the client.
PSAs: are they fair?A Biba spokesman warned that PSAs may be classed as inducements. "Firms that give or accept them [PSAs] need to be mindful of FSA rules and guidance," said the spokesman.FSA rules stipulate that firms must take "reasonable steps" to ensure they do not "offer, give solicit or accept an inducement". A Jardine Lloyd Thompson spokeswoman said: "We do not disclose information on PSAs." Marsh said these agreements have been a market practice for "many decades". A spokesman added that disclosure of them was important. He said: "We disclose them on client invoices, on our website and in the group's annual report."Willis was unavailable for comment as Insurance Times went to press.