UK insurance intermediaries are failing to manage conflicts of interest when dealing with small business clients, according to the country’s Financial Conduct Authority (FCA).

It says intermediaries sometimes act as agents for insurers as well as customers, but not all small businesses understand this.

Such businesses are experts in their field but tend to be inexperienced in buying insurance, and they must be able to trust intermediaries to act in their interests.

“If there are conflicts of interest that are not identified or properly managed, that trust is put at risk,” FCA Director of Supervision Clive Adamson said.

The authority says there is increased risk when a broker acts as an agent for the customer and insurer in the same transaction.

Some intermediaries rely on disclosure as the main way to address conflicts of interest, but this is sometimes generic and hard for customers to understand.

The FCA fears some small businesses could end up paying too much or buying products they do not need.

It intends to use “appropriate regulatory tools” to address specific issues and says all intermediaries should take note of its findings.