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Insurance transparency: Opening the books

At a glance

  • Big changes are taking place in the insurance industry
  • Transparency is becoming an increasingly high profile issue
  • Brokers who believe in integrity and expertise in dealing with their customers will prosper in this new landscape

With scandals such as the mis-selling of payment protection insurance as well as the fallout from the financial crisis still raw in the minds of the UK public, greater transparency is being demanded by end-users in all areas of the financial services sphere.

And the impact on general insurance is likely to significantly increase over the coming years.

“Issues around mis-selling, for example payment protection insurance (PPI), has cast a shadow over the insurance industry, even though it is largely a banking issue,” said Sophie Spink, Head of Government and Industry Affairs at Zurich.

The direction of travel of the transparency agenda is going one way, and quickly. In the future, people are more likely to question what they are getting for their money.

Sophie Spink, Head of Government and Industry Affairs at Zurich

“It has insurance in its title, but PPI was, in the main, sold in addition to products and services, such as mortgages and loans. But, mis-selling in any part of the financial services industry has done little to enhance the reputation of the insurance industry. It has led to assumptions being made about the honesty of insurance providers when people don’t fully understand the fundamentals of insurance or understand the business.”

Changing landscape

As the EU continues to debate the second coming of the Insurance Mediation Directive, which promises to increase standards of transparency and disclosure in insurance sales, as well as a new regulator, the Financial Conduct Authority, looking to make its mark in the UK, the general insurance sector is bracing itself for big changes.

Brokers, in particular, are likely to be the most concerned with the introduction of any new transparency regime that could include commission disclosure for the first time. Commissions have been central to an insurance broker’s business model for decades, and remain the most cost efficient way for a broker to be remunerated at lower premium levels.

“We support transparency, but the debate should be focused on fully understanding the purpose and the customer impact and appetite for more information,” Sophie said.

These changes come at a time when brokers are being sandwiched between customers, who are trying to navigate themselves and their businesses through these times of financial austerity, and insurers who are seeking higher premiums to return to acceptable returns on equity.

“The direction of travel of the transparency agenda is going one way, and quickly,” said Sophie. “In the future, people are more likely to question what they are getting for their money and there is a new generation of customers now who are a lot more savvy and understand what constitutes value.”


Over a decade ago, the life insurance market underwent similar changes. Independent financial advisers were fearful that they would have to justify their worth, much like how many general insurance brokers feel today. However, it was the IFAs that offered a more personalised and innovative service, as well as developing specialist knowledge of the industry, who survived and ultimately prospered in this new landscape. IFAs who could not provide value for money and failed to adapt to the new regime fell by the wayside.

“Brokers will have to act more like a profession, along the lines of a solicitor or accountant, to justify their commissions in the future,” said Sophie. “As ever in times of change, it will be those brokers who believe in integrity and expertise in their dealings with their customers that prosper in the long term.”

Help for brokers

In an increasingly transparent world, one of the biggest jobs brokers will face is learning how to cope with challenges and questions from their customers regarding both the remuneration the broker earns and the insurer’s pricing. For that reason, Zurich will invest significant time and effort to help brokers better explain to customers where their money is spent in the complex world of insurance.

Image © Getty

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