The UK Financial Services Authority has announced a further program of work to consider possible inefficiencies in the commercial general insurance market before taking a decision on whether to mandate commission disclosure.

Under the Financial Services Authority’s (FSA) current rules a commercial insurance broker must disclose commission information if the client requests it. In March 2007 the FSA commissioned CRA International to conduct a forensic market failure and cost benefit analysis into whether commission disclosure should be made mandatory.

However, CRA found a lack of transparency in commissions paid to intermediaries in the commercial general insurance market which gives rise to market imperfections. FSA work next year will focus on: measures aimed at improving the quality, clarity and consistency of key disclosures made by firms to their commercial customers. This will include disclosures relating to commission, status, service, and conflicts of interest; thematic work on conflicts of interest. This work will consider the extent and nature of conflicts that arise from commission paid by insurers to intermediaries.

Hector Sants, CEO of FSA, said: CRA’s research concludes that the costs of mandating commission disclosure appear to outweigh the benefits. Given this research, we have therefore decided not to mandate commission disclosure at this stage. However, we still have concerns around transparency and wider market efficiencies and will continue to keep the matter under review.