Small businesses may be paying over the odds for insurance and even buying cover they don’t need, according to industry experts .Regulator the Financial Conduct Authority (FCA) claims many comparison sites and regulators have a conflict of interest when dealing with business customers.
The main problem identified by a study carried out by the FCA was 68% of business owners believed their broker acted for them when they were also acting as agents for the insurer at the same time.
The review of seven of Britain’s largest small business insurance brokers also revealed that although 86% of small businesses believed their broker was offering them the best quote from a range of providers, the broker was really only sourcing cover from a single provider.
Clive Adamson, director of supervision at the FCA, said: “Small businesses are experts what they do but are often not experienced in how to buy insurance. That is why they need to trust their insurance broker to act in their best interest. If conflicts of interest are not identified or properly managed, that trust is put at risk.”
The FCA criticised many brokers for their failings in dealing with small businesses –
- Small businesses risked misselling when the broker acted for them and the insurer at the same time
- Business and management controls were lacking to avoid conflicts of interest
- Many brokers ducked managing conflicts of interest by disclosing the problem in writing instead of managing the problem
- Misselling was more likely when add-ons and credit were involved in the transaction
“While the review focused on larger firms, all intermediaries should take note of the findings and ensure any conflicts are appropriately managed,” said an FCA spokesman.
The FCA also threatened to impose sanctions or fine brokers who missold business insurance to entrepreneurs.
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