Transparency, disclosure and conflicts of interest in the commercial insurance market - Part 1

Earlier this year the Financial Services Authority (FSA) produced a Discussion Paper explaining its concerns about transparency, disclosure and conflicts of interest in the commercial insurance market and inviting views and comments on these from interested parties.  This e-Update sets out the current position in relation to these matters and the concerns the FSA has about them.  A subsequent e-Update will follow considering the potential solutions to these concerns, which have been identified by the FSA.

Background

The starting point of the Discussion Paper is that if issues surrounding intermediary remuneration and services in the commercial insurance market are opaque this could have a detrimental impact on both customers and market efficiency, as well as lead to a less competitive market.

The FSA believes that commercial customers need three key pieces of information when making decisions about their insurance intermediary: (1) how much the intermediary is paid for mediation activities; (2) what services the intermediary provides; and (3) on whose behalf the intermediary is acting including what, if any, conflicts of interest he may face.

Relevant legal and regulatory framework

Current market practice

The FSA's concerns