Director of insurance policy at the Association of British Insurers (ABI) James Dalton said broker commission poses challenges for the reputation of the entire insurance sector, a sentiment supported by the CEO of one major insurance firm.
Speaking at the Birmingham Insurance Institute’s 2016 Insurance and Financial Services Conference, Dalton said that while he feels insurance will never become more than a ‘grudge purchase’ for consumers, the industry should do more to make purchases more pleasant and positive.
“As an industry we need to make sure customers can access the best insurance deal; ensure that the premium offered is fair and transparent; and make sure that the insurer is there in the customer’s time of need,” he said. “Fail on any of these counts and as an industry we fail to demonstrate to customers the benefits of the highly competitive general insurance markets that exist in the UK. And we fail to improve our reputation as an industry.”
Dalton also said he feels it is only a matter of time before the Financial Conduct Authority (FCA) begins to ask questions about the transparency of broker remuneration.
“In a well-functioning market, service providers compete on the price and quality of their offering,” he said. “They are not inappropriately influenced in providing advice based on the payment of commission. The question for debate is whether there is a well-functioning market in the distribution of general insurance products.”
While the FCA’s rulebook already requires the disclosure on commissions on request for commercial customers, Dalton said the industry still has questions it must ask itself.
He remarked: “Are commercial customers aware that they can request disclosure and do they do so in practice? Is it right that the burden is on the customer to ask rather than on the broker to disclose upfront? And if brokers have nothing to hide from their customers, then what is the problem with increased and proactive transparency?”
Amanda Blanc, CEO AXA
UK & Ireland, General Insurance supported Dalton’s comments. “Greater transparency has been creeping in to every aspect of insurer operations for several years and that is completely in line with growing customer expectations. AXA
has raised the issue of broker commission transparency several times in an attempt to get this issue on the agenda so we welcome the comments from James Dalton today.
“Achieving true transparency cannot be secured by insurers alone – brokers have to play their part and being up front with their customers about commission levels would show that the insurance industry is serious about being completely open with the public.”
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