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LONDONThe Financial Services Authority has published updated information on its oversight of contract certainty, broker commission disclosure and conflicts of interest in the United Kingdom insurance market.
The FSA, the U.K.'s insurance regulator, wrote to the chief executive officers of nonlife insurance businesses, to tell them it believed the industry had done enough towards achieving contract certainty for buyers to stave off regulatory intervention for now.
But in its "Dear CEO" letter, the FSA warned that there are areas where more work on contract certainty is needed.
Among other things, the FSA noted, there appears to be a false belief among some firms that the issue of contract certainty is applicable only to the London insurance market.
The regulator added that some firms are failing accurately to measure contract certainty, among other examples of poor practice.
On the issue of transparency of broker payments, the FSA last week wrote to the CEOs of nonlife insurance brokers noting that it had discovered a "widespread lack" of measures to ensure that buyers are given information about monies earned on the placement of their business should they ask for it.
Under FSA rules, brokers in the United Kingdom must disclose to commercial insurance buyers details of commissions earned on the placement of their business if the buyer requests such information.
In the letter the FSA reminded brokers that they must have systems in place to enable such disclosure, and said that boards should establish and maintain such systems.
And in a newsletter on nonlife insurance, the FSA noted that a recent review of more than 60 brokers had revealed that while most have adopted policies to manage conflicts of interest, "relatively few have implemented them."
While about 80% of companies the FSA studied had developed conflict-management policies, many of those had not sufficiently communicated those plans to staff, according to the newsletter.