by GK Strategy 5th December, 2017
3 min read

A brutal 2018 for wholesale insurance broking?

The first three pages of the FCA’s 2017/18 business plan lay bare the changing nature of finance in the UK. Named ‘scene setting’ – the challenges facing the FCA might be better labelled as a ‘battleground’.

The UK’s finance regulator has the task of grappling with a £7.3bn Peer to Peer sector, dealing with an explosion in risky motor finance deals and reversing the bleak statistic that 16 million people in the UK have savings of less than £100.

Yet, despite the big challenges in personal finance, the FCA has set out its stall on a big review into the practices of London’s centuries old insurance market. Previous years have shown that the FCA likes to have a meaty headline investigation in its business plan supported by broader themes for examination. Next year is no exception.

In 2018, the UK’s biggest insurance brokers will face wide-ranging questions over their conduct, market dominance and potential conflicts of interest as part of a new probe. The FCA will also review the way £68bn of specialist insurance is bought and sold in the UK.

The sector has experienced somewhat of a bashing in recent years, with around 160 wholesale brokers in London already being investigated over their investment consultancy businesses after the FCA said there were “serious concerns” about the way the market operates.

Although insurers complain that London is an unreasonably expensive marketplace, and the FCA have long highlighted that broker commissions are rising as a percentage of premiums, this fresh probe into broking has really stemmed from concern about the impact on businesses growth if they are unable to get appropriate cover or are paying more for cover than is necessary.

According to the plan, one of the main areas of focus for the FCA will be the growing use of broker facilities, in which brokers group a large number of clients together rather than shopping around the market for them individually. There is particular concern that such facilities allow the brokers to charge large commissions but do not necessarily give their clients the best coverage.

As with all large market assessments, the FCA’s investigation is expected to take up to two years to complete and could result in rule changes, enforcement actions or even a dreaded referral to the Competition and Markets Authority for a more in-depth investigation. There is some way to go before this, however, with an interim report by the FCA only set for publication in autumn 2018.

But with an ongoing investigation in the market and a new review announced as part of the 2018 business plan, the wholesale insurance market could find itself dealing with a heap of recommendations to consider over the next two years, along with an uncertain economic outlook.

While potentially bad news for big players, if brutal recommendations are presented with the aim of increasing competition, then expect more insurtech players to emerge presented with a clearer path to chipping away at the dominance of the big brokers in London.


To discuss this article or find out more about how GK can help clients in financial services, please contact johnny@gkstrategy.com

See more articles by GK Strategy

sort news by category

Insight, Strategy, Impact,

2022, AI, apprenticeships, awards, B2G, Biden, Bills, Blueprint, bolt on, Boris, Boris Johnson, Brexit, business, care, careers, Chancellor, childcare, circular economy, climate change, climate crisis, clinical trials, commissioning, Communications, Consumer, consumer demands, COP, covid, COVID 19, covid recovery, Crisis comms, culture, d, David Laws, decarbonisation, defence, Deregulation, Devolution, Digital, diplomacy, Disruption, diversity, Due Diligence, early years, economic policy, Edtech, Education, elections, electricity, Energy, Energy and Environment, energy efficiency, energy security, energy supply, engagement, Environment, Equality, ESG, EU, europe, evictions, exit plan, finance, Financial Services, food and drink, food sector, food strategy, foreign office, fossil fuels, gas, general election, General News, Germany, gig economy, GK culture, gk report, global politics, Government, government affairs, green, green energy, HE, Head of Policy, Health, health & Care Bill, health and care, health and social care, health funding, health insights, Healthcare, Hendy, Home Office, housing, HS2, i have a voice, ICS, immigration, Immigration Bill, infra, infrastructure, insight, insight report, insights, integrated review, integration, international development, internship, Investment, Investor, Investor Backed Businesses, Investor Services, investors, Ioan, IWD, Jack Sansum, Jeremy Corbyn, job, Labour, labour conference, Labour market, landlords, Legislation, legistation, Levelling up, levy, life sciences, local government, lockdown, medical devices, Medicines, membership bodies, mental health, mental health services, nationalisation, NHS, no, No deal, nordic model, nurseries, overseas aid, parliament, pharma, pharmaceuticals, Planning, plastic packaging, policy, Political Due Diligence, Politics, POV, Pride Month, Prime Minister, Private Equity, Privatisation, Procurement Bill, property, Public Affairs, Public Relations, Public spending, Queen's Speech, rail, recruitment, REF, refugees, regulation, renewable power, renters, renting reforms, REPowerEU, reshuffle, sales, Schools, Scotland, Scott, security, Select Committee, select committees, skills, Social Care, solar power, Spending Review, spring statement, Strategic Communications, students, sustainability, SWP, Tax, tech, Technology, technologyy, tenants, The Conservative Party, The Labour Party, trade bodies, transformation, Transport, uk, UK Politics, united states, university, US, US election, US investment, Wales, Waste, White paper, wind, wind power, Winter Plan, women, Workplace,