This report summarises the findings of our thematic review which looked into whether insurance intermediaries serving small to medium-sized enterprises (SMEs) are able to effectively identify and mitigate conflicts of interest arising from their remuneration structures.
The report is aimed at general insurance intermediaries, insurers, relevant trade associations, representative groups for business and consumer bodies. It should also be of interest to owners and managers of SMEs.
Our review looked at a sample of large intermediaries, considering how their business structures and the remuneration they receive could create conflicts of interest that work against the best interests of customers. We also carried out consumer research to understand SME customers’ expectations of the services intermediaries provide to them.
We found a number of issues and unmitigated conflicts that could result in intermediaries prioritising their own interests over those of their SME customers. These included:
Our research suggested that many SME customers do not fully understand the role being performed by their intermediary and how this might have changed in recent years. Many customers still perceive their intermediary as an independent advisor working as their agent and seeking quotes from a number of insurers, even where this may not be consistent with the nature of the relationship described in the disclosure that they had received.
We are taking the following actions as a result of our findings:
We expect all general insurance intermediaries to reflect on how they manage the conflicts of interest arising within their business model in the context of our findings and concerns set out in our review, and to make any necessary changes required to ensure that they are complying with the existing regulatory requirements in this area.
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