Broker remuneration needs more transparency, say buyers at the FERMA Forum

Conflicts of interest in broker’s dealings with clients, stemming from generous remuneration and compensation schemes, have not been resolved, in fact they may have got worse, since the Spitzer inquiry. This was the message that emerged when buyers debated the topic at the FERMA Forum in Brussels.

Peter Berring, group risk director, De La Rue, said: ‘The cloud is coming back down over the issue. I worry that there isn’t transparency on contingent remuneration. And that goes well beyond commissions, which are just a small part of it.’

Issues around broker credibility and overall confidence in the insurance markets have forced some participants to call for an outlawing of contingent commissions.

‘What we are trying to get is a level playing field, we are not trying to get rid of people’s remuneration,’ he added.

Thierry van Santen, corporate risk manager, Groupe Danone, said: ‘There is consensus that conflicts of interest exist in broker remuneration. Everyone knows there is a problem, but no action is being taken.’

Peter Den Dekker, corporate insurance and risk manager, Stork B.V., added: ‘The situation in Europe is not unified. The northern market is the most developed with total transparency for remuneration.’

A spokesperson for the Commission, who was presenting their findings on competition in the commercial insurance sector, said that the EU was conducting consultation work on the issue. ‘We are open to all submissions from market participants,’ she said.

“Obviously conflicts of interest should be minimised.

Tommy Persson, president of the Comité Européan des Assurances (CEA)

The Commission added: ‘We are aware of this argument, but for the time being we are still analysing the replies. We have yet to realise a final conclusion.’

John Hurrell, AIRMIC’s chief executive, asked the Commission for a guarantee that the buyers’ side would be given a stronger weighting in future deliberations. The guarantee was not forthcoming from the Commission.

The Commission responded: ‘You will see that all opinions have been taken into account.’

Presenting the insurers side, Tommy Persson, president of the Comité Européan des Assurances (CEA) explained that the CEA this year endorsed principals which said that buyers should be presented with the correct information in order to make informed decisions. ‘Obviously implementation of those principals is key. The CEA will keep monitoring this issue for the next years.’

‘Obviously conflicts of interest should be minimised,’ said Persson.

See also: FERMA calls for improved broker transparency