The Financial Conduct Authority (FCA) has published its final report of the Wholesale Insurance Brokers market study which was launched in November 2017 to assess how competition was working in the sector.
Overall, the FCA has not found evidence of significant levels of harm that merit the introduction of intrusive remedies. This report is, therefore, not an interim report but their final report, which you can read here: final report.
The FCA has, however, identified some areas of concern which have scope for improvement including:
- firms’ management of conflicts of interest;
- the information firms disclose to clients; and
- contractual agreements between brokers and insurers which, in a small number of cases, have the potential to limit competition.
These areas coincide with the ongoing work being undertaken by the FCA to ensure that key provisions of the Insurance Distribution Directive (IDD), which came into effect in October 2018, are embedded, including (but not limited to):
- identifying customers’ insurance demands and needs;
- product oversight and governance; and
- customer best interest rule.
The FCA plan to continue to work with firms to address the above concerns and will continue to monitor the market as part of its normal supervision function to assess developments arising from the impact of EU withdrawal and possible further consolidation in the industry and as a consequence of any changes in business models.
Note: The findings were drawn from multiple pieces of analysis including 73 brokers’ and 49 underwriters’ responses to the questionnaire looking at market features including conflicts of interest management, market shares and entry/exit. Throughout the project, the FCA engaged with market participants. This included brokers, underwriters and UK and international industry bodies.