Wholesale insurance brokers face investigation conducted by UK FCA
The Financial Conduct Authority held a much anticipated examination of that brokering market.
The United Kingdom’s Financial Conduct Authority (FCA) started an investigation into wholesale insurance brokers. This long anticipated examination of the insurance brokering market is expected to find answers regarding a number of reports. This includes claims from a top executive that there is “abusive behavior” going on.
The FCA said the review’s terms of reference would be published today at 7:00 GMT.
The FCA promised that it would look into the wholesale insurance brokers market as early as last April. At that time, it said “We want to ensure that the wholesale insurance market is working well and fosters innovation and competition in the interests of a diverse range of consumers.” It released that statement as a part of its business plan, when it revealed its intentions to examine that marketplace.
“Following the publication of this market study, we will consider appropriate remedial actions,” it also added.
The FCA declined the opportunity to comment on the wholesale insurance brokers investigation ahead of Wednesday.
Wholesale brokers function as mediators between insurers who sell to the consumers and the underwriters. For this reason brokers tend to have a specialty in certain specific forms of insurance product.
Back in April, Chubb chairperson and chief executive, Evan Greenberg, spoke to shareholders and described the current “soft” insurance market setting as an indicator of “abusive behavior” from certain brokers. He claimed that they “enrich themselves at the expense of both their customers and underwriters.”
Greenberg went on to explain that the “predatory behaviors” of some unethical brokers were appearing in markets around the globe, particularly in London. He described them as “simply unsustainable” from the perspective of the underwriter, and he pointed out that those abuses of consumers would “come back to haunt these brokers.”
The FCA study is expected to continue until 2019. From there, the UK watchdog has the authority to impose changes on wholesale insurance brokers in order to prevent such abuses from continuing in the future. Moreover, should unfair practices be discovered within the investigation, the FCA also has the power to enforce action.