The British Insurance Brokers’ Association (BIBA) has unveiled a new guide aimed at clarifying the workings of the commission model. Released on the first day of this year’s BIBA Conference, the guide is designed to enhance understanding among consumers and businesses of the benefits derived from this longstanding compensation structure. It seeks to counter the arguments for abolishing or limiting commissions.
Alastair Blundell (pictured right), BIBA general insurance head, lifted the lid on the release, saying: “We created this publication because we think it is important to give our members guidance on explaining the advantages of the commission model and what it represents in terms of the work brokers do for customers during the life of their policy.”
The guide also tackles the potential drawbacks of moving away from the commission model, such as the loss of free advice for customers at the point of sale, drawing parallels with the effects observed following the 2012 Retail Distribution Review.
The resource underscores how commissions enable brokers to serve all customers equitably and notes the efficiencies the model offers to insurers in terms of product distribution.
BIBA chief executive Graeme Trudgill (pictured left) commented: “Commission payments have been under the spotlight, but we wanted to highlight the significant advantages to both customers and the insurance market that this longstanding practice brings.
“In particular, the fact that people approaching an insurance broker who is paid by commission receive free advice without any obligation to buy will help anyone to find a way to increase their financial resilience through insurance.”
In addition to the commission model guide, BIBA also published a guide for members who arrange premium finance for their clients. Announced during Trudgill’s address at the BIBA Conference, the new resource aims to assist brokers in demonstrating the fair value of premium financing services.
The guide is meant to supplement the Fair Value Assessment Framework developed by economics consultancy Oxera for the trade body. It is expected to support members in articulating the fair value of the services they provide as credit brokers.
David Sparkes, BIBA regulation director, elaborated on the initiative, saying, “We wanted to give members the confidence to show that they are offering fair value to their customers when suggesting premium finance products.
“We hope that once customers understand the costs incurred by the lenders in offering the finance and the work done by the broker in offering and managing the service throughout the life of the loan, they will see the value such arrangements bring.”
Both guides can be accessed here.
What do you think about this story? Share your thoughts in the comments below.
