FCA publishes final report from its wholesale insurance brokers market study
The wholesale insurance brokers market study, opened in November 2017, was launched in response to industry concerns around competition issues. Now the FCA has published its final report into the sector, following in-depth analysis of the market.
The regulator identified the following as areas of concern:
- Market power: High market concentration could lead to some brokers exercising market power and generating high profits, as well as creating barriers to entry or expansion
- Pay-to-play: Whether insurers are being compelled to sign consultancy-style pay-to-play service agreements with potentially inflated prices
- Onerous contractual clauses that distort competition, including limiting the insurer to serve the whole market
- Broker conflicts: The risk that brokers could receive higher revenue for business placed in certain ways or tie reinsurance in with other brokerage services, which may not be in clients’ best interests and could interfere with competition in the market
- Broker coordination: Coordination and collusion can result in higher prices or lower quality service.
Overall, the FCA did not find clear evidence of the competition concerns identified above, or significant levels of harm. Although there are a number of areas which do warrant further action (including disclosure, conflicts of interest and contractual agreement between brokers and insurers), the regulator will not be introducing any intrusive measures to address them. Instead they will be tackled as part of its regular supervisory process or competition law enforcement activities where appropriate.
New Chair of the Financial Services Consumer Panel named
The FCA has announced that Wanda Goldwag has been appointed Chair of the independent Financial Services Consumer Panel (FSCP), effective from the 1st March 2019. Ms Goldwag will serve as Chair for an initial three-year term.
Wanda Goldwag currently serves as the Chair of the Office of Legal Complaints, as well as Non-Executive Director of The Royal Free London NHS Trust and a lay member of the QC appointments panel.
The Chair of the FSCP acts as the public face of the panel and is responsible for representing the interests of consumers to the FCA board and senior staff.
FCA issues first enforcement decision under competition law
In its first formal decision using its competition enforcement powers, the FCA has found three asset managers in breach of competition law. The three firms were found to have shared strategic information during an initial public offering (IPO) and a placing before the share prices were set. This undermined the process of setting the share price and could have raised the cost of equity capital for the issuing company.
One of the firms involved has been granted immunity under the competition leniency programme. The other two have been fined £306,330 and £108,600 respectively.