The wholesale broker market has been given the all clear by the Financial Conduct Authority, at the end of a 15-month review of competition in the sector. Although the report flagged up areas for improvement, the FCA said it has "not found evidence of significant levels of harm that merit the introduction of intrusive remedies."
Airmic said it was "encouraged" by the findings which resonate with its own research into the potential for broker conflicts of interest. However, the association said the broker market should pay attention to the areas of concern highlighted by the regulator.
"Airmic supported the FCA putting this important subject under the spotlight, and we agree with the overall findings of the report as they relate to the experienced insurance buyer in large organisations," John Ludlow, Airmic's chief executive, said.
"We have counselled our members, and for them transparency is the most important factor. While there remain some questions about the growing complexity of services provided by brokers to insurance carriers and how they are remunerated, very few of our members have concern with transparency."
He added: "We have to acknowledge that brokers, like all businesses, must adapt their business models to changing circumstances, and most of our members report a very good working relationship with their brokers."
The FCA review was prompted by significant changes in the wholesale insurance sector in recent years, which has seen brokers developing new services and business practices for the insurance industry. This led to renewed concern that potential conflicts of interest may be detrimental to the end client.
Airmic contributed to the review by hosting a roundtable and various meetings for members and FCA representatives. Members were also invited to submit their views in writing.
Although the FCA was overwhelmingly positive in its assessment, it did identify the following areas of concern: 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.
Mr Ludlow welcomed these caveats. "The system is working well but it's not perfect. We have always stressed to our members that they should be taking a proactive approach. These findings are a useful reminder that they should be asking questions of their broker before placement and making sure they are absolutely clear about how insurers are selected and how solutions are tested against the open market."