Corporate insurance buyers in the United Kingdom want brokers to automatically disclose their commission earnings when arranging coverage, according to a new survey that also found a widespread lack of understanding about the level and breadth of broker remuneration.

The survey, conducted by Insurance Research and Strategy, was sponsored by the International Underwriting Association and Lloyd's Market Association.

The survey of some 500 corporate insurance decision-makers found strong support for mandatory disclosure, with between half and 60 percent in favor, depending on the type of compensation involved. This would encompass recognized commission and fees from clients, as well as payments from underwriters–including commissions paid in the London market.

The results showed high levels of ignorance and confusion surrounding broker remuneration. Only one respondent in five was aware that brokers can earn commission over and above what they charge clients, even though this has long been common practice. The respondents also seriously underestimated broker commission.

While 48 percent either did not know or refused to estimate the amount of commission their broker earns, the remainder guessed an average of 9.7 percent for their main commercial combined insurance policy. A typical commission is actually between 17.5 percent and 20 percent, the associations noted. For commercial motor policies, respondents guessed commissions at about 8.9 percent, when typically it is from 10-to-15 percent.

When informed that the U.K. Financial Services Authority requires brokers to disclose commission upon client request, over 68 percent welcomed the position.

Larger firms (with commission between ?250 million and ?400 million–or between $433 million and $692 million at current exchange rates) as well as those employing risk managers were much more aware of commission levels and also more likely to favor mandatory disclosure.

However, despite their desire for more transparency, the survey suggests that most buyers do not believe broker commission arrangements compromise their service, the survey found.

Special Reports /

London Buyers Want Brokers To Reveal Commission Earnings

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