The Financial Conduct Authority (FCA) has launched a market study to assess how competition is functioning in the wholesale insurance broker sector and whether it could work better.
The FCA said it wants to ensure that the sector is working well, and fosters innovation and competition in the interests of its diverse range of clients.
The regulator explained that there have been remarkable changes in the wholesale insurance sector in recent years which have resulted in brokers developing new services and business practices.
As part of the study, the FCA said that it plans to explore how brokers compete in practice and whether they use their bargaining power to get clients a good deal, assess what conflicts of interest exist, how they are managed and how they affect competition and client outcomes and examine how broker conduct impacts on competition in the sector.
The FCA said it believes that effective competition contributes to ensuring London continues to be an international centre for insurance FCA executive director of strategy and competition Christopher Woolard said: “Given the size of the wholesale insurance sector and the type of large scale risks it covers, the way it functions can have a wide-ranging impact on the broader economy. If businesses cannot get appropriate cover or pay more for services than they should, it can impact on their ability to operate and grow.
“Brokers play an important part in the wholesale insurance sector ensuring clients get appropriate coverage at good value. However, following significant changes in the sector, we are looking at the dynamics to ensure competition is working well.”
The FCA aims to publish an interim report in autumn next year which will plan out its analysis, preliminary conclusions and any potential solutions to address concerns.
The London insurance market is one of the world’s leading centres for large scale, complex commercial and specialist risks, controlling more than £68bn in gross written premium.