Corporate insurance buyers in the United Kingdom want brokers toautomatically disclose their commission earnings when arrangingtheir coverage, according to a survey.

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The research also found a widespread lack of understanding aboutthe level and breadth of broker remuneration.

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The survey, conducted by Insurance Research and Strategy, wassponsored by the International Underwriting Association (IUA) andLloyd's Market Association (LMA).

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More than 500 corporate insurance decision-makers wereinterviewed for the survey from a sample of U.K. midsize-to-largecorporate businesses that use a broker for their main commercialproperty-casualty or motor insurance, or both, the organizationssaid.

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The survey found strong opinion favoring the introduction ofmandatory disclosure of commissions by brokers. This wouldencompass recognized commission and fees from clients, as well aspayments from underwriters, including commissions paid in theLondon market.

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The results showed high levels of ignorance and confusionsurrounding broker remuneration. Only one respondent in five wasaware that brokers earn commission over and above the percentagethey charge their clients, even though this has long been commonpractice. In addition, the respondents seriously underestimatedbroker commission.

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While 48 percent of those currently paying commission either didnot know or refused to estimate the amount of commission theirbroker earns, the remainder guessed an average of 9.7 percentcommission for their main commercial combined insurance policy. Atypical commission is actually between 17.5 percent and 20 percent,the associations said.

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For commercial motor policies the clients thought it is about8.9 percent. Typically it is around 10-to-15 percent.

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When informed that the U.K. regulator Financial ServicesAuthority requires brokers to disclose commission upon request bytheir clients, more than 68 percent welcomed the position.

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For different types of commission, respondents were asked if itshould be mandatory, voluntary or not necessary for a broker todisclose the levels of commission received. Between half and 60percent said they were in favor of mandatory disclosure.

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Larger firms (with commission between ?250 million and ?400million–U.S. $433 million and $692 million), and those employingrisk managers, were much more aware of commission levels and alsomore likely to favor mandatory disclosure of commission.

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Despite their desire for more transparency, the survey suggeststhat most buyers of commercial insurance do not believe thatbrokers' commission arrangements compromise the service theyprovide.

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