Conflicts of interest - In your best interests

Yes, it is correct. Under the law of agency, you are expected to find the best deal for your principal, which is the client ordinarily. If you were to withhold a discount that was available to you simply because it was not necessary for you to secure the business then this would conflict with your prime duty. It may help both you and the insurer, yet if the client found out that you had done this then they may not understand.

Your conflict-of-interest policy should set out how situations like this should be handled and there are a number of strategies that you can employ to ensure you are fair to the client while managing the relationship with the insurer and, at the same time, not ignoring the interests of your business.

Transparency in dealings is something that is high on the Financial Services Authority's agenda for commercial insurance and, while on the subject, there is another important issue that should be covered by your conflicts-of-interest policy: how you negotiate with insurers.

Beware if an insurer requests you to 'see what you can carry for us'. If you go along with this then you could be accused of rate fixing - potentially committing a fraud. Beware also of charging a fee to the client and at the same time taking a commission; unless you disclose this to both parties immediately then you could also be guilty of taking a secret commission, which again is potentially fraudulent.

The FSA is looking again at how brokers manage conflicts and, if your policy deals only with hospitality, lacks detail and is not supported by written procedures, you may be running a grave risk. If in doubt, see your compliance consultant or contact your trade body at the earliest opportunity.

- Ian Ritchie, director, RWA Group

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