Making sense
“We are talking about general transparency but it is not very specific. It says you should only do business with sensible advisers, whatever that means. But it is a step up. It means that Isle of Man companies are going to have to prove to their boards and the regulators that they have actually thought about which advisory firms they do business with.”
Kneeshaw expects the Isle of Man changes will bring some additional pressure to life companies “because we are in a transition mode and nobody exactly knows how commission disclosure is going to play out”.
The primary beneficiaries of the changes will be the bigger, committed life companies and advisers, he said. “The transition is going to be fascinating over the next two to five years as it plays out. Not everyone will win.”
Foy expects there will be some short term arbitrage against the Isle of Man because “there will always be providers, who deal with advisers who do stuff outside regulation until they get carted off for it”.
International life companies have a role to play in the transition, Jopp added. “We have to do what we can to ensure that good advisers get the support they need to be able to transition through a period where the remuneration structure changes.”
While financial assistance is one type of support, Jopp said they could also offer expertise about different types of business model and how the advice firms can change their businesses.
“In the UAE, for example, the vast majority of brokers will get indemnity commission, they will keep a percentage to run their business and then pay the vast majority off straight down to the sales person. You cannot just turn that off. If you do, the whole thing will collapse.”
Jopp said insurance companies must work with their distribution partners to make sure the change is controlled to avoid “mayhem” in the market. He added, however, that he expects it will result in a reduction in the number of brokers in the UAE.
Future forecast
In his final question, Emery asked the panel where they thought their respective businesses will be in five years’ time and how they are coping with the downward pressure on profits and assets under management.
Jopp said: “I see Zurich’s business in the Middle East being bigger in five years’ time. There is downward pressure on increasing efficiencies. The challenge for an international company is where you are trying to be multi-jurisdictional and having wide geographies as trying to administer policies becomes much more complex.
“Companies have to use technology to try and get costs out of the whole structure. For us, it is about being closer to the customer and giving them what they want.
“The triangle of value to the customer, insurance company and the distributer has shifted in certain parts of the world towards the distributer, and must be rebalanced.”
