Regulator may change broker classifications

The Irish Financial Services Regulatory Authority is to consider changing the way it classifies insurance brokers as part of a review of financial services intermediaries, which will take place next year.

The financial regulator's chief executive, Patrick Neary, admitted yesterday that the terms "multi-agency intermediary" and "authorised adviser" could be confusing for consumers and overly bureaucratic for brokers.

Mr Neary's comments, which he made at a conference held by the Insurance Institute of Ireland, were welcomed yesterday by the Irish Brokers Association (IBA) and by the Professional Insurance Brokers Association (Piba), which has lobbied the regulator to remove the classifications.

But Piba chief executive Diarmuid Kelly said he was disappointed that the review would not take place until 2007.

In 2001, the Central Bank divided brokers into three categories: tied agents, who could only act for one company; restricted activity investment product intermediaries, who held agencies with several companies; and authorised advisers, who must give advice based on the entire financial services market.

The restricted activity investment product intermediary category, into which the majority of brokers fell, was eventually renamed the multi-agency intermediary after it was pointed out that the former title was unwieldy and had an unfortunate-sounding acronym (Raipi).

"Basically the message is the Central Bank got it wrong in 2001 and we would welcome a revisit by the regulator," Mr Kelly said.

"Consumers don't understand what a multi-agency intermediary or an authorised adviser is, or what tied means," said Pat O'Sullivan, financial services director of the IBA.

"They do not understand that, if they are dealing with a tied agent, they are waving their right to choice and impartiality."

Piba wants a return to the old system where intermediaries were known as brokers if they held agencies with more than five companies, agents if they represented up to five companies and tied agents if they sold the products of just one company.