The FSA (Financial Services Authority) is considering options including the mandatory disclosure of broker commissions to solve continued concerns over conflicts of interest and transparency in the Commercial Insurance market.

The FSA has been looking at broker fees for more than a year, but a report in December found rules forcing insurance brokers to be more transparent could not be justified on cost-benefit grounds.

Under current rules, insurance brokers are not required to disclose how much they receive for arranging cover for risks unless specifically asked to do so by their clients.

The FSA said, however, that it was concerned a lack of transparency was hurting customers and creating market inefficiency. Customers, it said, were still poorly informed about elements including the cost of mediation services, or the commissions, and whose capacity the intermediary is acting in.

In a discussion paper, which the industry can respond to until June 25 2008, the watchdog said it was looking at options for addressing its worries, including a more rigorous enforcement of existing rules, an enhanced regime for disclosure on request by the customer and mandatory, automatic disclosure.

“It is important that insurance buyers know what they’re paying for when they use an intermediary. We remain concerned that for some buyers of commercial insurance this is not the case,” Dan Waters, the FSA’s director of Retail Policy and Themes, said. “Our discussion paper offers some potential regulatory solutions, but the door also remains open for an industry-led response.”

Broker fees have been a subject of controversy since a 2004 probe in the United States by New York Attorney General Eliot Spitzer, which showed some brokers had rigged bids.