Monday, 23 June 2014
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.
However, even though I share with others the belief that fee income will become a larger and larger part of every brokers’ income, I cannot be persuaded that this should be universal, or desireable or professional.
In France, for instance, they don’t have a lot of indiginous brokers and the majority of the population are served by tied agents of one insurer or another. In the central square of any small/medium size town across France (or Italy) you are going to find an Axa sign or a Generali sign hanging outside of some premises or other. These will be tied agents who, rather like NFU Mutual agents, recieve about 8% in commission when something is sold, but some proportion of the other expenses are paid for them.
Consequently, it is very easy to be pro commission disclosure if all you are disclosing is 8%, just like your competitors, whilst there is no obligation to disclose the assistance you get on rent, salaries, computers etc.
Also, it is quite easy to be pro disclosure if one is big enough to arrange work transfer deals, set up a captive in the Isle of Man and any one of a dozen other disclosure avoidance schemes not open to the little guy.
It would be a tragedy in the small independent broker with an average 17.5% commission ended up disclosing 10% more than the bigger broker who managed to find a way of hiding 25% of their own.