The UK's Financial Conduct Authority (FCA) is reviewing the value proposition offered to clients by wholesale insurance brokers. It has been suggested that some of these firms are offering customers a "service" rather than providing insurance. The regulator has stated it believes this practice, when employed by large brokerages, could pressure insurers into taking on risk from these facilities. It also questions whether a conflict of interest is being introduced into the market by the use of facilities, noting brokers can garner greater fees through this practice at a greater cost to clients.
The UK's Financial Conduct Authority (FCA) is reviewing the value proposition offered to clients by wholesale insurance brokers. Under particular scrutiny is brokers' use of facilities grouping together pools of risk which can then be allocated to different insurers. The regulator has stated it believes this practice, when employed by large brokerages, could pressure insurers into taking on risk from these facilities. It also questions whether a conflict of interest is being introduced into the market by the use of facilities, noting brokers can garner greater fees through this practice at a greater cost to clients.