"We are also concerned that levels of commission may not always be consistent with fair value and may incentivise unnecessary product churn."
It's a small comment, a short comment, an almost throw-away comment.
But to someone with a long memory, it has sounded a tinny alarm bell ringing in my head.
I know, I bang on about this a lot - whether there is a move towards the FCA becoming a price regulator and whether the FCA will want to start putting pressure on commissions.
"Churn" was indeed a big concern on investment products and one of the reasons why the then FSA pushed for the removal of commission on investment products.
If they're using this language about insurance products without evidence that product churn has indeed been happening, then you can see the direction of travel.
As one commentator said to me, 'switching' is not the problem that the regulator might think it is. Insurance providers and brokers will often switch customers to newer, cheaper products with lower premiums.
Rarely are people put on more expensive premiums, unless there is a significant health or life development that means more extensive underwriting rather than a quick decision.
Moreover, brokers can waive commissions already or just have outright fee structures - but even so, the average monthly life insurance premium in the UK is around £38pm.
A tiny basis point of that monthly premium will be the commission - if commission has been applied.
Disaster zone
Don't get me wrong: a review of commission and products and suitability is always welcome and probably long overdue in the insurance world.
But if there is an outright ban on commission, I would not be surprised and probably neither would you.
It may be a long time coming but under the guise of consumer duty, but I'd bet my left eye the regulator will eventually squeeze out commission payments on insurance.
And this would be a disaster.
We already know that people have been ditching their insurance as the cost of living crisis bites.
It doesn't take a brain child to work out that if commissions are stripped out of the product because "levels may not always be not consistent with fair value", and added together as a hefty upfront or even annual fee, there will be many people who just use that as an excuse to pull the plug on their premiums.
Many won't even check to see if the upfront fee and/or annual fee is fair value, or work with their broker/insurer to shop around or negotiate a lower price. Some will just think the whole thing is unaffordable.
