After reading a recent issue of Insurance Times (News, 6 April) I was left wondering whether it was the April Fool edition, as I could not decide whether the article on
commission disclosure was a serious attempt to open discussions on the rights and wrongs of disclosure.
I noted from the article that the spokesman from the Federation of Small Businesses (FSB) decided to remain anonymous, and I must admit if I had made those comments, I too would wish to remain anonymous.
Would small businesses be in favour of disclosure of profits if they all had to adopt the same business ethics, such that when I went to a small business to make a purchase I could tell from the price just exactly what mark-up the small business was placing on the products?
As the sale price of products in small businesses are not dictated by the supplier, then they are true hidden costs.
The point that this person makes regarding insurance having hidden costs is unfounded.
The figures quoted by insurers are totally out of the control of the broker. All premiums paid include a predetermined percentage commission. This amount cannot be altered by the broker as it is outlined in the terms of business with the insurer.
The point that they want a level of transparency so that they can make a more informed choice again highlights apparent ignorance of the insurance market.
How, knowing what level of commission a broker makes, can give the client a more informed choice on the type of cover given and the quality of product offered is beyond me.
If we have a case where a broker is charging £2,000 and earning 10% commission, and another broker is charging £1,600 and earning 20% commission, which product, after making an informed choice, would this small business opt for?
The cheapest? Or is the logical answer the one where the broker is getting less commission as more of the premium is going to the insurer to provide the relevant cover.
Without looking at what cover is being offered under the insurance contract and what advice has been given under the demands and needs section, then the commission earned by a particular broker is totally irrelevant. Fees charged on top, or instead of, commission is a different argument.
The proposition of commission disclosure would just leave the market to go to the source which is prepared to offer it at the cheapest rate. This would have no other effect than to lower the standards of service within the industry.
MG Tattersall
Director
Burnley Insurance Bureau
