THE BIG QUESTION: Can the brokers have it both ways?

INSURANCE BROKERS HAVE BEEN UNDER pressure to improve transparency and the way they conduct business since former New York Attorney General Eliot Spitzer decided to clean up the sector in 2001. It took a while for the campaign to spread to Europe, but the debate rages healthily here too, following investigations by the European Commission and leading regulators such as the Financial Services Authority in the United Kingdom. BIE asked Europe's biggest insurance buyers the direct question of whether brokers should be prevented from taking payment from both customers and insurers to prevent the steering of business. This question drew by far the biggest and most energetic response, and is clearly something that exercises the minds of the buying community

Official insurance buyer response on the subject of broker remuneration to the recent sector inquiry on Business Insurance by the European Commission's Competition Directorate, suggested that they did not want to rock the boat and upset the brokers too much.

The party line was that Europe's insurance buyers are relatively comfortable with the brokers' taking revenue from them and the insurance companies at the same time, so long as they are not overtly dependent upon the volume of business placed and are sufficiently transparent.

The brokers, who would lose a massive stream of revenue if they were prevented from taking commissions from the insurers, breathed a sigh of relief as the European Commission appeared to accept these arguments and focus on the issue of block exemption instead.

A similar response to the U.K. Financial Services Authority's inquiry is expected from the larger buyers.

But Business Insurance Europe's poll of more than 30 insurance buyers drawn from Europe's 100 biggest companies by revenue found a big majority in favor of an outright ban.

Just under two-thirds (65%) of the insurance buyers polled believe brokers should be prevented from taking payments from both... For the full article click here to download the digital edition of the BIE 100 Risk Manager Survey 2008