Brokers are clamouring to regain trust, says Andy Cook
' According to an Airmic survey, most FTSE 100 insurance buyers want greater transparency from the brokers and insurers. Well I would have been surprised if they had said they wanted less - even if you had asked them six months ago.
But with Eliot Spitzer's pursuit of Marsh and others, there is now an impetus for brokers to do something. All of the multi-national brokers and many of the insurers who underwrite risk-managed clients are undertaking internal reviews. And fast. With 1 January renewals already underway for some of the biggest programmes, it is understandable that brokers and insurers all want to be able to hand clients a piece of paper that says: "You can rely on us".
In addition, it seems that the FSA will now hold out on authorisation for the national brokers until their internal reviews are complete and accepted.
In the UK, Spitzer smacks of over-reaction. Bid-rigging is unfair and should be punished, severely. But incentives are part of every industry. Electrical retailers receive bonuses from manufacturers based on how many fridges, TVs and DVDs they sell. Housebuilders receive extra cash from brick manufacturers based on the volumes of their bricks used. Customers in both cases are neither aware nor seemingly care about these bonuses. OK, they can compare prices easily, but clients can use two or three brokers to benchmark their prices too. A straw poll of brokers shows that many of Marsh's clients are already looking to new pastures in the UK. One rival told me how two or three of Marsh's major UK clients had come knocking at his door.
While everyone is reassuring each other that this is a storm in a teacup, it is tying up valuable resources ahead of the busiest period of the year and stalling some negotiations. This can only be to the advantage of brokers who do not have to prove that they are whiter than white. So it seems that the continuing success of smaller brokers in the mid-market could be given a boost over coming weeks.