The consultation paper relates to the proposed new Conduct of Business Code, which will bring in mandatory, worldwide commission disclosure for life companies with a presence on the Isle of Man within the next two years.
The Isle of Man Financial Services Authority (IoMFSA) published a summary of the industry’s responses on Tuesday.
Disclosure query
A key point raised among the 12 respondents was the need for further clarity of exactly what charges should be disclosed relating to commission, given the different methods of remuneration.
The group listed six examples:
- Initial and on-going commission (whether a percentage of premium or fund value or a flat fee);
- Total payments to the intermediary firm where this exceeds the payment to the individual intermediary providing the advice;
- Volume related payments, for example, where there is uncertainty of the amount of payment until the end of a period (eg end year);
- Fund Investment Adviser Fees where the investment adviser is also the distributor;
- Fund Manager soft commission payments; and
- Marketing Allowances – these are typically not direct payments but support provided to intermediaries in respect of their marketing/promotion activities.
IoMFSA response
In the summary document the regulator stated that it has “sought to establish the principles surrounding remuneration disclosure rather than attempting to explicitly prescribe the wording to be used for every scenario”.
“An insurer must document and be able to explain to the Authority how their product charging and remuneration structures have been developed to pay due regard to the interests of policyholders and to treat them fairly.”
Disclosure timeline
It was revealed in the summary document that there would be a two-stage implementation of worldwide commission disclosure.
Key Information Documents (KID) given to policyholders from 1 January 2018 must confirm if any commission is paid on the product and the range of commission.
Policyholder specific commission must be included in KIDs from 1 January 2019.
