FSA responds to call for help on GI conflict of interest rules
FSA Chief Executive, John Tiner, told a City audience today: “As part of our preparations for supervising insurance intermediaries, we’ve been working with the industry to expand our understanding of how different commission arrangements work in different sectors of the market.
“We are satisfied that our new rules for insurers and intermediaries – that a firm must not offer or accept an inducement that is likely to conflict materially with its duty to customers – are adequate to deal with potential abuses. But we recognise the importance of firms understanding their responsibilities to their customers – and it is also important that customers understand firms’ obligations in this area.
“Both wholesale and retail firms in the industry have asked us for further guidance on the rules on inducements and conflict management and how they will operate in practice for insurers and their distribution chains.
“So we are writing to trade associations later today with further guidance which aims to help firms determine how inducements can operate unfairly and lead to conflicts in the duty that firms owe to their customers. We may later decide to incorporate the material as guidance in our Handbook after we have studied the results of some focussed supervision work on conflict management we plan in the next few months. This work will extend to retail insurers and intermediaries in addition to the wholesale market which we publicised as a priority in our recent Business Plan.
“Following extensive consultation we decided not to make commission disclosure mandatory for insurance mediation. However, in line with our overall support for greater transparency for customers, firms may choose to go beyond the disclosure rules in ICOB. The ICOB rules require commission to be disclosed to commercial customers on request and intermediaries will need to make sure they have in place appropriate systems to meet these rules.”