INSURANCE brokers could lose one of their main sources of income due to a regulatory investigation announced yesterday, a leading lawyer has warned.
Steven Francis, head of regulation at City law firm RPC, raised concerns about the Financial Conduct Authority’s (FCA) decision to probe insurance brokers over potential conflicts of interest. He said the investigation could end the practice of brokers receiving payments from insurers as well as clients.
“It would cause a massive shake-up of the insurance industry and alter the way insurance policies are sold,” he told City A.M.
But Francis insisted the FCA would be desperate to avoid such a radical change, which would be akin to the recent ban on paying commission for investment products.
“What’s more likely is the FCA has a look and tries to satisfy themselves that – despite what is definitely a conflict of interest – brokers are managing the relationships well,” he said. “But some firms will probably come out pretty badly and face enforcement cases.” The FCA will report back at the end of this year.