More specifically, an agent, without the knowledge of the insured, may not derive any benefit or advantage from the investment contract, except that envisaged by the insured at the time of the conclusion of the contract. If a broker is found to have breached a fiduciary duty, any person who knowingly contributes to the breach of that duty may also be held directly liable to the insured, such as an insurer. All insurance brokers and intermediaries must comply with the requirements of the ACF Manual, including those contained in the Insurance Conduct of Business Sourcebook (ICOBS). If a consumer requests additional information about the commission, such as.B. The amount, the broker is not required by the rules to react – although ICOBS reminds companies that the disclosure rule is considered an agent of the insured in addition to the legal obligations of the broker, including the obligation to account for any secret profits and avoid any conflict of interest. The guidelines also suggest that if a client wants to know the amount of compensation, the company must disclose it. A simple fee system is perhaps the least problematic form of broker compensation in terms of transparency and potential conflicts of interest, given that the amount is negotiated and agreed between the broker and the insured. The IDD introduced a new proportionality rule: the administrative organisational measures of a company to deal with conflicts of interest must be proportionate to the activities carried out, the policies sold and the type of insurance distributor that is the company. The IDD has also introduced a rule that a broker must ensure that its management body receives regular and at least once a year written reports on registered conflicts of interest. The simplest method is a simple fee agreement between the broker and the client. More often, the broker earns a commission agreed with the insurer but deducted from the premium paid by the insured.
In certain circumstances, the insurer and the broker may have entered into another agreement where the broker has received additional fees or commissions from the insurer for the contribution of a certain volume of business or the achievement of agreed profit targets. This is sometimes referred to as the conditional board, brokerage service agreement or market service agreement. The IDD aims to promote the overall objective of promoting a level playing field in EU Member States in insurance distribution and reinsurance. It is also about ensuring that consumers enjoy an adequate level of protection, regardless of the distribution channel through which they have purchased an insurance product, and create a level playing field and competition between insurance intermediaries. In November 2019, the FCA published guidelines for insurance manufacturers and distributors in general insurance distribution chains to clarify their expectations of companies in the general insurance and protection sector following changes to the DLI in product supervision, governance and broker compensation. Remuneration is broad and includes “revenues from commissions, profit-making agreements, royalties and any other economic or non-economic benefits realized in connection with the distribution of an insurance product”. . . .