Disclosure - Knowing what to reveal

Your colleague is partly right. There is guidance in respect of conflicts of interest, transparency and disclosure in the commercial insurance market set to be released soon, though it has not been created by the FSA.

This new guidance is an insurance industry-grown solution. The British Insurance Brokers' Association has been leading the development of this industry solution for some time now and this has involved discussions with the Association of British Insurers, the International Underwriting Association, the Lloyd's Market Association, the London & International Insurance Brokers' Association and the Institute of Insurance Brokers. It is this solution that is currently working its way through the FSA's official industry guidance process and it is hoped that it will receive confirmation very shortly.

The beauty of industry guidance is that the FSA will take it into account when exercising its regulatory functions, so if a broker were to breach the relevant FSA requirements, the regulator would take into account the firm's adherence to the guidance in any enforcement action.

The guidance will be voluntary, so you do not have to follow it if you do not want to. You should also remember that the guidance represents one way - and not the only way - in which your firm can demonstrate compliance. However, if you choose not to follow the guidance then you will need to be able to demonstrate what you are doing instead to comply because the FSA will be sure to ask.

The guidance does not impose new requirements on firms. Instead, it reaffirms the FSA's existing rules and principles relating to intermediary disclosure, transparency and managing conflicts of interest. However, it does seek to provide firms with greater clarity about what is required of them in areas including the broker's capacity and status, the existence of distribution chains and the commercial customer's right to commission information and disclosure. Unless you have been woefully lax with your compliance since the beginning of FSA regulation in 2005, the contents of the guidance should not come as a surprise or require any major overhaul of your practices.

You are not on your own. Biba has provided a checklist of some of the things that you ought to consider when implementing the industry guidance. Watch for a series of briefings around the country about the guidance that Biba will be holding. You will also see lots about it in various commercial customer trade publications, including those serving the insurance sector.

The important thing is that, once this industry guidance is issued, all insurance brokers and intermediaries embrace it. The guidance needs to be embedded in the day-to-day practices of firms so that, when the FSA supervisors come to test progress in the market (it has already promised that it will do this is 2010-11), the industry can demonstrate that the guidance is having a positive effect and that there is no need for any mandatory disclosure.