Consultation on whether brokers must tell clients about exclusive deals
Brokers are failing to inform their clients about exclusive arrangements they have with an insurer, the Insurance Brokers’ Standards Council (IBSC) said.
The council has warned that not telling clients about any deals that would make it harder for them to switch brokers could breach FCA rules on treating customers fairly.
Under exclusivity agreements, brokers typically only get a quote on a specific type of policy from one insurer. And in some instances there are clauses which stop clients moving to another broker but keeping the same insurer.
The IBSC said it fully supports the concept of exclusivity, but warned brokers could be breaking one of the FCA principles by failing to provide clear information that puts clients in a position to make an informed decision.
In a statement the IBSC said: “It seems to be a breach of the principles of treating customers fairly, if there is a barrier to them transferring from one insurance broker to another, by virtue of an exclusivity arrangement they had not been advised about before inception.”
IBSC chair and James Hallam managing director Paul Anscombe told Insurance Times the council favours exclusivity where a particular insurer can give the client the best terms of service and breadth of cover.
He added: “We are not saying that exclusive arrangements are bad - but we are saying as a broker you have the absolute duty to make sure all the parties are aware of the arrangement and the obligations around it.”
“There are many occasions when that is not appropriate and you should go to the open market and speak to several insurers to get a balanced view of what insures would want for that risk.”
The IBSC has now launched a consultation on whether members must tell clients about exclusive deals before recommending a policy.
The council said it has received “regular” comments from brokers around the misuse of exclusive quotes.
The results of the consultation will form part of the guidance notes in the council’s code of conduct.
The consultation ends on 30 June. Non-IBSC members are also invited to give their opinion.