Fee and commission disclosure set for 1 January implementation
Leading market sources are predicting full commission disclosure will become a standard feature of the UK market after Marsh announced “significant” reforms.
The reforms, which include informing each client of all fees and commissions earned by the broker, are to be implemented from 1 January 2005.
They will see Marsh disclose “all revenue”, including fees, retail commission, wholesale commission and any premium finance compensation earned.
Marsh said all revenue streams would be “100% transparent” to clients, and would insist that insurers show commission rates on all policies.
“If Marsh do this, everyone else will have to follow,” said one London market source. “Commission disclosure is inevitable.”
As the fall-out from New York attorney general Eliot Spitzer's inquiry continued this week, insurance buyers have hit out against the use of placement service agreements (PSAs).
Airmic director general David Gamble said that the organisation had always been against volume overriders (PSAs) as they created “distortion and conflicts of
Airmic first examined the use of PSAs in the UK six years ago, but Gamble said it was “important to review the subject”.
Airmic is currently surveying members to find out how prevalent PSAs are in the UK and whether they want them abolished.
Gamble said that the response to the survey so far suggested that the use of volume overriders was a “big issue” for Airmic members.
Meanwhile, speculation emerged about Marsh's ability to continue acquiring UK regional brokers in light of the investigation.
Marsh declined to comment but a source close to the broker said: “There is no reason why that will change”.
The source added that Marsh had retained law firm Freshfields to carry out a review of the broker's UK business because “it is in its clients' best interests to ensure there are no question marks over its operations in the UK”.
It is understood that smaller national brokers, along with several leading regional brokers, have begun attacking Marsh's “key clients” in an effort to win new business.