FCA issues warning to intermediaries over insurance for SMEs

Research has prompted the FCA to conclude that unaware small businesses using insurance intermediaries could be duped into over-paying or buying products unnecessarily because the intermediary has not responsibly managed the conflict of interests.

The body has called on intermediaries to be responsible in managing conflicts of interest when dealing with small businesses as clients.

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.”

Certain lines of insurance such as those relating to commercial property, residential property owners and landlords were found to attract very high rates of commission, despite the relative lack of complexity in broking those products.

More than 65%  of firms surveyed believed that intermediaries acted as their agent when selecting and placing their insurance.  When in fact the professionals can also act as agent for the insurer.