The FSA has been considering whether to change its rules to make
brokers disclose to their business customers the commission they
receive from insurers, but it postponed making a decision last
December after an independent study questioned whether disclosure
alone could be justified on cost-benefit grounds.
The study carried out for the FSA by CRA International estimated
the cost of mandatory disclosure at £87 million with ongoing costs
of £34 million a year. It said that as few as 10% of commercial
clients are likely to be adversely affected by non-disclosure.
The FSA has now said that it has wider concerns about market
inefficiencies and will be carrying out further work on disclosure,
conflicts of interest and raising commercial customer
awareness.
The announcement was made in the FSA's latest Business Plan,
published this week. A discussion paper is planned for the first
quarter of 2008 and the FSA says that it will consult on any
necessary changes to the FSA Handbook in the early autumn, with a
view to publishing final rules in early 2009.
The European Commission highlighted broker remuneration as an
area of concern last year. Its business insurance sector final
report questioned whether disclosure alone is enough to deal with
potential conflicts of interest between broker and client. The
Commission promises to follow up its findings in its planned review
of the Insurance Mediation Directive in 2008-9.
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