The Tentacle

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Messerschmitts & heinkels

I attended a recent Question Time event in London, run by Insurance Age and sponsored by Axa.  It was a pleasant and interesting evening and, indeed, the following buffet and the choices of wine weren’t too bad either.

Inevitably a question was asked of the panel and Amanda Blanc in particular about commission disclosure. I think one could say that the panel claimed to be open minded in relation to this issue, however, the audience seemed largely unpersuaded about the comparisons and analogies used to argue that such a move might be the right way forward.  

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Commission disclosure - dead donkey or wooden horse?

Industry figures, particularly those from bigger brokers and continental owned insurers, cannot but periodically help themselves but to venture once again to suggest the professional benefits of mandatory commission disclosure.  This is despite the FSA in its twilight years having commissioned two consultancy studies to prove the case in favour; they failed to do so both times.  

I think I am right in saying that every client of a TEn member with an annual spend in excess of £100k on insurance - and there are quite a few now - is dealt with on the basis of nett rates and fees. Between £50k and £100k there are a fair few more besides and some others even below £50k, so we are not opposed to the practice, at the right time and at the right level, it is the correct method of remuneration. 

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... but, is it a profession?

I would contend that insurance broking is not a profession and general insurance advice does not consitute a financial service.

Misconceptions in both respects stem, I believe, from over-exposure to the local newspaper during our formative years. I certainly remember local solicitors, accountants and brokers featuring periodically in the Folkestone & Hythe District Herald following their departure to Brazil with a suitcase full of other people’s money.

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The hidden brokers

The market is expecting another round of broker consolidation and restructuring in the next 12/18 months. Poor economic conditions and further regulatory control will undoubtedly force the pace of M&A activity, but little is heard of the impact on those ancillary relationships that surround a lot of brokers.

Many experienced practitioners have found a safe haven in the form of an Appointed Representative (AR) arrangement, that that official or unofficial, with a known broker ‘friend’ where they can continue to trade in the manner they have been accustomed to.  They rarely tend to have formal agreements in place with their broker partners, preferring to rely instead on ‘gentlemen’s agreements’.

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Homer’s Oddity

I was surprised recently to read that the new Chairman of Biba believes that the future focus of our association might not be centred solely upon brokers; rather it should be the trade body for insurance intermediation of every form.

Clearly, such a notion - had it been muted a few years ago - could have seen Biba embrace the non-professionals at the heart of the PPI mis-selling scandal that has resulted in the imposition of crippling FSCS levies on honest brokers. Biba and its newly merged partner, the IIB, have been fighting hard to separate brokers from these very intermediaries in the consciousness of politicians and regulators alike.

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