The issue of secret commissions in multi-occupancy buildings insurance has cast a spotlight on long-standing concerns around transparency and fairness within the insurance industry. For leaseholders, a lack of clarity over how service charges are allocated has often led to frustration and mistrust. This debate has brought fresh scrutiny to the roles and responsibilities of insurers, brokers, and Managing General Agents (MGAs), prompting calls for greater accountability across the market.
The Financial Conduct Authority’s (FCA) introduction of new rules in December 2023, requiring commission disclosures to leaseholders, marks a significant step toward improving transparency. However, the implications of these rules have raised critical questions about the unique position of MGAs in the insurance value chain. Are MGAs, acting as agents of insurers, bound by the same obligations as brokers? Or does their role require distinct consideration within the regulatory framework?
As the Managing General Agents Association (MGAA), we recognised the need for clarity and took decisive action to ensure the voice of MGAs was heard. Our lobbying efforts focused on establishing the distinct role of MGAs as agents of insurers rather than intermediaries. By engaging directly with the FCA, we sought to provide our members with the certainty they need to operate confidently within the regulatory landscape.
This proactive approach resulted in a key clarification: under the Insurance Conduct of Business Sourcebook (ICOBS) 6A.7, the commission disclosure requirements apply specifically to brokers who place multi-occupancy buildings insurance policies. MGAs, when operating as bona fide agents of insurers, are not obligated to disclose their earnings related to the placement of these policies. This distinction is crucial and highlights the MGA’s role as an extension of the insurer, rather than an independent intermediary.
The FCA’s clarification underscores its willingness to engage with industry stakeholders and respond to legitimate concerns. It also validates the MGAA’s efforts to ensure MGAs are properly recognised within the regulatory framework. However, the insurance industry must remain vigilant. Nuanced or unique situations may still arise, and MGAs should seek professional advice to address potential grey areas, ensuring compliance with both the letter and spirit of the rules.
For MGAs, this moment represents an opportunity to lead by example. Transparency and ethical practices are not merely compliance requirements—they are the foundation of trust and long-term success. MGAs who proactively embrace these principles can reaffirm their value to insurers, brokers, and policyholders alike, while contributing to a more transparent and ethical insurance market.
The MGAA remains steadfast in its commitment to advocacy, ensuring the regulatory framework continues to reflect the vital role MGAs play in the insurance ecosystem. This includes ongoing dialogue with the FCA and other stakeholders to address emerging issues and promote best practices. By championing the unique position of MGAs, we aim to build a stronger, more cohesive insurance sector.
The FCA’s willingness to listen and provide clarity is a positive step for the industry. It reflects a collaborative approach to regulation that values the expertise of associations like the MGAA. For MGAs, this is an opportunity to adapt, engage, and continue delivering innovative and trusted solutions to the market.
Ultimately, these developments are not just about commission disclosure; they are about fostering a culture of transparency, fairness, and trust. MGAs, as agents of insurers, are well-positioned to lead this charge and play a pivotal role in shaping the future of the insurance industry.
