LONDON, Nov 8 (Reuters) - Britain’s markets watchdog will review whether the wholesale insurance broker sector is giving value for money following concerns over how large players operate.
The Financial Conduct Authority (FCA) said “broker facilities” will be a focus, a reference to how a broker groups together different types of insurance business for different clients and then allocates chunks of this group of business to insurers.
This should make insurance cheaper for clients but can leave insurers with little scope to dictate their own terms.
The FCA said larger brokers may be using their market power to oblige insurers to sign up to these facilities or pay for wider services.
“The London broker’s role is to make sure that their clients obtain appropriate coverage for their needs, at a price that represents value for money,” the FCA said in its 30-page terms of reference document for the review published on Wednesday.
“The FCA believes that effective competition contributes to ensuring London remains an international centre for insurance.”
The FCA has powers to force through changes in the structure of the market if it finds uncompetitive behaviour.
The watchdog will publish interim findings in autumn 2018 with “any potential solutions to address concerns”.
Reporting by Huw Jones; editing by Jason Neely