Bluefin’s £4m fine should serve as “wake-up call” for brokers, say experts

Compliance experts have urged brokers to review their systems and controls to make sure they are not misleading their customers.

This follows the news from 6 December that the Financial Conduct Authority (FCA) has fined Bluefin Insurance Services £4,023,800 for misleading its clients between 9 March 2011 and 31 December 2014, when the broker was owned by Axa.

The regulator stated that Bluefin had “inadequate systems and controls and failed to provide information to its customers about Bluefin’s independence in a way that was clear, fair and not misleading”.

Branko Bjelobaba, managing director of insurance at compliance consultancy firm Branko Limited, stated that other brokers should pay attention to the “chunky fine”, adding: “It’s the first time we’ve had a fine for misleading customers in terms of early product disclosure requirements.

“A broker is meant to explain how they access the marketplace and you can’t claim to be an independent insurance broker if you’re not.”

Action
In addition, Terence Clark, compliance director at RWA, stated that any enforcement action from the regulator should serve as a bit of a wake-up call to the industry.

“If a broker is owned by an insurer it’s important that the broker and the insurer work together to ensure that there are no conflicts of interest and any decision to place business with a particular insurer can be justified as being in the best interest of the client,” Clark added.

Experts also noted that it is unlikely that the regulator will ban insurers from owning broking firms in the future, however they added that the FCA would be looking closely at these companies to make sure they are following the rules.

“There would have to be evidence that there’s a market abuse to be able to even start to think about taking action and banning insurers from owning brokers,” Clark stated. “There are rules in place to cater for this already and I think the FCA will be happy that they are robust enough.”

Disclosure
Bjelobaba further observed that ownership is not a problem as long as appropriate disclosure takes place.

“There are conflicts of interest here, because if you’re owned by an insurer you’re bound to be supporting what they provide and you can almost be an extension of their sales department but branded with a different label,” he continued.

“As long as you’re very clear and transparent regarding those arrangements then it’s absolutely fine.”

According to compliance specialists the Insurance Distribution Directive, which comes into force next year, will further require firms to disclose shareholding to clients.

“The rules are here to stay and the FCA will continue to rely on the rules being adhered to,” Clark continued.

He concluded: “This goes back to the wake-up call – have a step back and check if you’re at risk and take advice as needed.”

Stuart Reid, who was executive chairman of Bluefin during the time the failings took place, declined to comment when approached by Insurance Age.

Mike Bruce, who was Bluefin’s chief executive officer at the time, was unavailable for comment.

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