The Statement issued by the FSA sets out its continued interest in improving transparency in the mediation of commercial general insurance and the management of conflicts of interest (click here to see the full statement). In addition, the Statement contains a summary of the work the FSA has carried out on this issue since February 2005 (see our previous blogs here and here, as well as a summary of other related projects, which are influencing the FSA's approach, including the European Commission's report on business insurance (click here) and the Law Commission's July 2007 consultation paper Insurance Contract Law: Misrepresentation, Non-Disclosure and Breach of Warranty by the Insured.
The FSA states that evidence from its recent work suggests that, although intermediaries are largely managing conflicts of interest appropriately, more should be done to improve transparency of their remuneration, services and capacity. Based on the responses it has received to Discussion Paper 08/2 Transparency, disclosure and conflicts of interest in the commercial insurance market (click here to see the full details), the FSA has identified the following five outcomes (the Outcomes) which, if they are achieved will, in the FSA's view, provide a sufficiently transparent market and give customers access to the information they need to make informed decisions:
- customers should have clear and comparable information about the commissions intermediaries receive;
- customers should have clear and comparable information about the services intermediaries are providing;
- customers should have clear information about the capacity in which an intermediary is acting;
- customers should be alerted to their right to request commission information; and
- customers should be made aware where there is a chain of intermediaries.
The FSA does not currently believe that additional regulatory measures are required to address conflicts of interests but will continue to pay close supervisory attention to their management, particularly for those business models where the potential for conflict is much higher.
The FSA has been in ongoing discussion with the Association of British Insurers, the London Market Insurance Brokers’ Committee and the British Insurance Brokers’ Association about how to achieve the Outcomes. The intermediaries' trade associations have committed to developing industry guidance for endorsement as FSA confirmed guidance and to promoting the guidance amongst their members.
The FSA proposes to assess in 2010/11 whether the Outcomes have been achieved, resulting in customers receiving clear and comparable information about their intermediaries' services, capacity and remuneration.