Commission

The Insurance Conduct of Business Rules in the Financial Services Authority Handbook, issued under the Financial Services and Markets Act 2000, regulate the conduct of insurance intermediaries. However, the Rules fall short of requiring commission disclosure in consumer cases. In Harrison and Anr v Black Horse Ltd [2011] EWCA Civ 1128 the Court of Appeal rejected various arguments to the effect that non-disclosure of commission and the very size of the commission were matters which infringed the FSA Handbook. The case rose in the very specific context of payment protection insurance taken out to support a credit agreement, so that the provisions of the Consumer Credit Act 1974 on unfair credit agreements were also attracted.

The nature of PPI insurance

This case concerned payment protection insurance (PPI). The purpose of such insurance is to allow a borrower to insure against the risk that he might become impecunious and be unable to repay the loan. Many complaints were made in relation to the selling of PPI cover, including that borrowers were not informed that such insurance was being taken out in that the cost of the premium was simply added to the loan, that some lenders insisted on PPI insurance and that PPI policies were often valueless to the assured in that they covered loss of employment in cases where the assured was self-employed and thus could never qualify for coverage. Very often the insurers providing the PPI insurance were in the same corporate group as the lender.