Brokers 'fail to deliver on transparency' says Airmic

After a review into the way insurance brokers are remunerated, the Association of Insurance and Risk Managers (Airmic) has concluded significant improvements in transparency have been made.

However, the association believes recent changes have not yet delivered the needed results, with further regulation becoming both inevitable and desirable without substantial progress by the end of 2006.

An Airmic task force was set up last November to monitor improvements in the wake of the Eliot Spitzer allegations in the US, and to assess whether changes to broker business practices had achieved transparency in remuneration.

Some of the main conclusions included: almost unanimous agreement that brokers should automatically tell clients about all their remuneration; more than a third of commercial insurance buyers complained they are still unable to get information they require about brokers' remuneration; even when they get the information, two thirds have to specifically ask for it; and nearly two thirds of commercial insurance buyers believe brokers should receive no payment at all from underwriters. This number has almost doubled since a survey only six months earlier.

Airmic chairman Andrew Cornish said that Airmic had up to now held back from expressing a view on recent changes in the way brokers are remunerated because it wanted to see if they worked in practice. But despite the reassurances it had received, it felt the changes did not go far enough.

He said: "Full disclosure should be an automatic right, a part of the business culture - not something you have to push for. I accept that changing business processes can be complex, and it may be that we are just going through a transitional phase.

"Nonetheless, unless the market moves to this automatic notification of all broker earnings, then the regulator must take responsibility. We urge the Financial Services Authority to let it be known they will take the necessary action if we are not there by the end of next year."