Market welcomes FCA's encouraging insurance broker study
Written by Deborah Ritchie
The market has welcomed a move by the Financial Conduct Authority to issue a final report on its assessment of competition in the wholesale insurance broker market. The FCA said that while it had identified some areas of concern and with scope for improvement, it found no need for the introduction of intrusive remedies.
Among those areas of concern were the issue of firms’ management of conflicts of interest; the information firms disclose to clients; and contractual agreements between brokers and insurers which, in a small number of cases, have the potential to limit competition.
The watchdog said it will work with firms to address all these concerns, in addition to assessing ongoing developments arising from the impact of EU withdrawal, and possible further consolidation in the industry and as a consequence of any changes in business models.
Executive director of Strategy and Competition at the FCA, Christopher Woolard said: “This was a significant and in-depth analysis of a sizeable and complex market to determine whether clients were at risk of harm. Encouragingly, we found no evidence that they were but we found some areas with scope for improvement and we will work with the industry to ensure these are addressed.
Commenting on the announcement, chief executive of BIBA, Steve White said the fact that the FCA closed this assessment at an unprecedented early stage validates the association's view that the wholesale insurance market is a highly competitive place. It was also welcome news, he added, that the FCA intends to deal with any follow up matters on a business as usual supervisory-led basis.
“There are many positives in the report and our members will be pleased to see that the regulator recognises that the sector meets client demands successfully," White commented. "We have regularly asserted that this sector provides customers with broad cover, competitive premiums quality paper and a full range of services that clients appreciate. The positive nature of this report reinforces this.”
KPMG insurance partner, David Miller echoed White's views, at the same time noting the FCA's concerns around those areas where more work is needed.
“The FCA has previously proven that it’s not afraid to show its teeth, the fact that it has therefore decided to make this a final, rather than interim report, shows they have real confidence in the operation of the market. This will be welcome news for brokers who have been working hard to transform their business models in evolving and uncertain markets. However, it’s clear there’s still work to be done around firms’ management of conflicts of interest, transparency and contractual agreements and every player in this sector will be keen to see progress is made,” he said.
The Wholesale Insurance Brokers market study which was launched in November 2017 to assess how competition was working in the sector. The FCA findings were drawn from multiple pieces of analysis including 73 brokers’ and 49 underwriters’ responses to the questionnaire looking at market features including conflicts of interest management, market shares and entry/exit.