U.K. Regulator Clarifies Compensation Rules
NU Online News Service, Feb 2, 2:40 p.m. EST?Insurance agents and carriers in the U.K. will not be forced to disclose commissions, the nation's top financial regulator said yesterday.[@@]
Speaking at a business lunch in London, Financial Services Authority chief executive John Tiner said that the decision was made after extensive consultation with insurance industry executives.
"However, in line with our overall support for greater transparency for customers, firms may choose to go beyond the disclosure rules in the Insurance Conduct of Business," Mr. Tiner said.
That code requires commissions to be disclosed to commercial customers upon request.
"Intermediaries will need to make sure they have the appropriate systems in place to meet these rules," he said.
The 2004 decision not to ban certain types of inducements such as volume overrides, market service agreements and profit share arrangements still stands.
But insurers and intermediaries could still violate the code if the inducements are structured in such a way as to create actions that are contrary to customers' best interests.
"Insurers could also breach the rule by structuring inducements in a particular way that they know will create a conflict in the duty the intermediary owes his customers. A potential example of this could include attaching conditions to an inducement, such as providing an inducement in the expectation that a contract with a particular customer will be renewed with that insurer," wrote Mr. Tiner in a letter to U.K. insurance trade associations.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.