The British Insurance Brokers’ Association (BIBA) is warning brokers that the revision of the Insurance Mediation Directive (IMD) could result in both mandatory disclosure of commission for the insurance industry by 2019, and the potential for an increase in the regulatory cost burden.
Eric Galbraith, BIBA Chief Executive, is set to warn brokers at BIBA’s 2012 conference that the text for the revised IMD, likely to be published by the European Commission in the coming weeks, could include a clause which means that commission disclosure could become mandatory.
Galbraith will warn brokers in Manchester next week that there is significant political pressure for mandatory disclosure and that political expediency in Europe may force the issue. Ahead of the conference, Galbraith said: “If the clause is published, this becomes real and it is unlikely that any politician is going to call for less transparency in financial services following the financial crisis.”
BIBA said that the publication of the clause could come despite an encouraging cost benefit analysis on the IMD from the European Commission in early 2012 which initially supported disclosure upon request. BIBA does not believe that a case to mandate disclosure had been proven but that political expediency could force the issue even though the BIBA-led industry guidance on transparency, disclosure and conflicts of interest has been championed at European level by Treasury, the Financial Services Authority and BIBA.
Steve White, BIBA Head of Training and Compliance, said: “We understand that the text circulating is not an official publication and therefore to comment in greater detail would be premature. BIBA and BIPAR, the European intermediaries’ association, believe that commission disclosure upon request is the most appropriate solution for disclosure in the general insurance market and BIBA continues to lobby on this basis.”
Galbraith concluded: “This could be an example of a ‘one size fits all approach’ from Europe which could have a detrimental impact on our sector. We continue to make the case for the BIBA-led industry guidance on transparency, but political interference in the remuneration system could be a by product of the over zealous application of investment type rules into the insurance sector.”