Some British insurers do not properly monitor the activities of appointed representatives, which exposes customers to undue risk, the Financial Conduct Authority says.

Appointed representatives (ARs) are the British equivalent of Australia’s authorised representatives. Both work as insurance brokers under an operating licence held by a central company they contract to.

The authority says a sample of 15 AR companies, selected from an initial survey of 190, has revealed more than half have no consistent framework to identify and manage risks from the activities of appointed representatives.

The initial survey uncovered examples of mis-selling by a third of businesses, which failed to notice ARs selling customers products they did not need or providing scant information before sales.

“While some principals had a good understanding of their appointed representatives’ activities and their obligations as principal firms, we found widespread examples of poor practice across the sector,” Director of Supervision Retail and Authorisations Jonathan Davidson said.

“In many cases firms were simply failing to understand and manage the risks arising from their appointed representatives’ activities.

“General insurance is a large and important sector and we are concerned about the potential for customer detriment arising from the lack of oversight of appointed representatives. All principal firms need to consider these findings and look again at their practices.”

The regulator has taken intervention action against five companies in the sample, including telling two to stop selling and consider allowing customers to seek redress.