Corporate insurance buyers in the United Kingdom want brokers to automatically disclose their commission earnings when arranging their coverage, according to a recent 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.

More than 500 corporate insurance decision-makers were interviewed for the survey from a sample of U.K. midsize-to-large corporate businesses that use a broker for their main commercial property-casualty or motor insurance, or both, the organizations said.

The survey found strong opinion favoring the introduction of mandatory disclosure of commissions by brokers.

However, the results also exposed high levels of ignorance and confusion surrounding broker remuneration. Only one respondent in five was aware that brokers often earn commission over and above any fees they charge their clients, “even though this has long been common practice,” the groups said, noting that respondents also seriously underestimated broker commission levels.

While 48 percent either did not know or declined to estimate the amount of commission their broker earns, the remainder guessed an average of 9.7 percent commission 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, clients surveyed thought commissions run about 8.9 percent, when typically it is from 10-to-15 percent.

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

Respondents were asked if it should be mandatory, voluntary or not necessary for a broker to disclose the levels of commission received. Between half and 60 percent said they were in favor of mandatory disclosure.

Larger firms and those employing risk managers were much more aware of commission levels and also more likely to favor mandatory disclosure of commission.

However, despite their desire for more transparency, the survey suggested that most buyers of commercial insurance do not believe broker commission arrangements compromise the service they provide.

Special Reports /

U.K. Buyers Want Broker Transparency

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