Following the initiation of its market study into the wholesale insurance brokers market in November 2017, the FCA has now published its final report.
The focus of the market study was on the following five areas:
- the possibility of some brokers being able to exercise market power to earn high commission and erect barriers to competition
- whether brokers were imposing ‘pay to play’ requirements on insurers or obtain higher commissions from placing business with certain insurers
- whether brokers were imposing onerous conditions in their contracts with insurers
- brokers potentially not managing actual or potential conflicts of interest appropriately, thereby leading to consumer detriment
- the possibility of broker coordination resulting in higher prices or lower quality service.
Overall, the FCA found no major concerns in any of these areas. However, it did have a number of comments on various points it found, in particular that:
- a small number of brokers did have unduly onerous conditions in their contracts,
- firms didn’t consistently demonstrate a complete understanding of potential conflicts that should be identified and mitigated, and
- firms needed to ensure that communications were appropriately transparent about commissions received.