Bribery has been on my mind this week. Not that I have been offered any bundles of cash or have been considering bribing anyone. Well not yet anyway.
No, what has got me thinking about it is the incentives that insurers often offer brokers for new business and the impending implementation of the Bribery Act. Basically, if an individual or a company is found to be indulging in or encouraging bribery or does not have appropriate checks and measures in place to combat it, then they could be up to their necks in legal trouble.
What has got me slightly worried on behalf of our beloved readers (that's you brokers) is the way in which this market remunerates the broking fraternity. On the face of it, the fact that brokers are acting on behalf of the client yet the level of their commission is controlled by the product provider, looks open to abuse.
What's to stop a broker dumping all his business with one insurer for an enhanced commission when that is not necessarily in the interests of his clients? That's why the regulator has demanded an industry solution to the 'problem' of commission disclosure. The industry has been doing rather well on this front but the Bribery Act adds another dimension.
What constitutes a bribe? Is it when a broker accepts a commission uplift from an insurer for new business that it brings? Surely that's an incentive for a broker to look favourably upon the rewarding insurer when he is looking at where to place his client's risk? Perhaps it's simply a matter of the size of that uplift. Perhaps it becomes bribery when the insurer provides all the broker's wives with expensive gifts on one of its lavish junkets? Why else would an insurer do that other than to curry favour and, by extension, attract business?
But this kind of thing has been going on for as long as insurers have needed brokers to get to market. But the rules of the game appear to be changing. I suspect that in the future, unless a broker can prove that his placing of business with a certain insurer had nothing to do with financial rewards provided by said insurer, he could find himself in a sticky situation.
Best speak to the compliance guys about this one but it's certainly one more thing that brokers will have to be aware of in what is becoming an increasingly scrutinised and regulated market. If you haven't already started talking wistfully about the good old days, then I suspect you will start to do so very soon.
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