Transparency and BIBA's final solution

As the British Insurance Brokers' Association prepares to offer a 'market-led solution' to the regulator to placate its concerns over commission transparency, many brokers will be wondering where it will all lead. Is this a step towards full transparency, as is the case in financial services? Does this often aired scepticism of brokers represent a realistic possibility or are brokers merely airing their fears, borne out of paranoia?

When asked to substantiate the view that the regulator will opt for full transparency via mandatory disclosure, brokers' answers are always invested heavily with compliance fatigue but little substance.

Without doubt, many are feeling bamboozled by regulation and the constant brainstorming required to assimilate high level principles into appropriate action applicable to their firm. The dynamics of regulation - with the Financial Services Authority laying down the principles and then policing firms, with no operational detail in between - seems to induce a paranoia that leads to thinking that anything is possible, even that full transparency is at some point inevitable.

However, this much expressed sense of foreboding, while understandable, runs contrary to some important facts. First, by the FSA's own admission it has no appetite for this extreme solution to its commission concerns. There is also the practical consideration that the regulator lacks the recourses to police this. Also, while the FSA does insist on absolute transparency in other sectors it regulates, this is not directly transferable to general insurance because, again by the FSA's admission, it poses the lowest risk of all the sectors it regulates.

Brokers may well feel the issue of commission disclosure is a big stick that the FSA beats brokers with - and it probably is. The regulator, however, will have to hold off at some point, as it quite paranoid itself about criticism from its masters - not least about squeezing the life out of the sectors it regulates.