The Financial Conduct Authority has cautioned this morning that conflicts of interest within insurance intermediaries are “not being properly managed” when it comes to dealing with small business clients.
It’s called on firms to manage situations better.
The City watchdog ran a review of small business customers, as they often have more complex needs when it comes to insurance, frequently relying on intermediaries as a result.
Intermediaries can play a number of roles in the distribution chain, sometimes acting as agent for the insurer as well as the customer. Because of how they’re remunerated, and the different obligations the roles require, the potential for conflicts of interest is heightened, the FCA explains.
The regulator wanted to establish how the flow of revenue from insurers or other sources to intermediaries could impact how customers were treated.
It concluded that control frameworks and management information haven’t developed at the same pace as business models within some companies, putting small businesses, who may be naive in such matters, at risk.
Clive Adamson, director of supervision at the FCA, said:
Small businesses are experts in their particular field but are often not experienced in buying insurance. That is why they need to be able to trust their insurance intermediary to act in their best interests. If there are conflicts of interest that are not identified or properly managed, that trust is put at risk.