| Link(s): | IUA Guidance on Commissions – IUA 076_IUA Guidance – SMB and related arrangements_September 2025 076_IUA Commentary – SMB and related arrangements_September 2025.pdf |
Context
The IUA has published a circular, a Guidance Note and an accompanying Commentary document about ‘Subscription Market Brokerage’ (commissions) and ‘related arrangements’. Significantly, those ‘related arrangements’ are about the disclosure of commissions, voluntarily, to customers. It seems that the guidance and commentary are based to a degree on a King’s Counsel opinion commissioned by the London Market Association (LMA), and partially funded by the IUA.
Key points to note and next actions
The circular, guidance and commentary do not seek to provide any opinion on the payment of commissions, however named or structured, or the quantum of such commissions. These matters are for commercial and contractual parties to negotiate and are beyond the scope of any trade association operations. The circular and the accompanying guidance are designed solely for the purpose of promoting transparency and disclosure of commission arrangements, and to reiterate the UK regulatory rules currently in place.
By way of background, the IUA Board has considered the ongoing challenges surrounding acquisition costs and the transparency of Subscription Market Brokerage. In addition to the increasing prevalence of Subscription Market Brokerage and similar arrangements, recent litigation and FCA intervention regarding motor finance premiums have prompted reconsideration of these matters from a regulatory compliance and governance perspective.
With the agreement of the IUA Board, the ‘short guidance note’ on commission arrangements and some explanatory comments have been drafted and published, which highlight key points from the King’s Counsel opinion in the commentary.
The guidance note is absolutely clear in its belief that:
- The broker owes a fiduciary duty to the end customer to be transparent in respect of all commissions, including Subscription Market Brokerage (SMB).
- The broker must always disclose details of commissions and related remuneration to non-commercial clients, and to commercial clients upon request.
- Insurers should understand the commission arrangements in place and whether they have been disclosed to the client.
The Guidance is suggesting that underwriters, to ensure compliance with existing FCA requirements in relation to commission information disclosure and to meet the broker’s fiduciary duty to its clients, could consider including contractual terms in broker Agreements to require full disclosure of any commissions to the insured, to include the amount, purpose and nature of services provided.
The accompanying commentary document sets out an overview of the King’s Counsel legal opinion, which considers the civil law position, comments on managing underwriter risk and addresses the regulatory and criminal enforcement position. We would urge firms to read this particular summary of the King’s Counsel legal opinion.
The IUA’s guidance and commentary could be viewed as another step in what might be seen as a general direction of travel in relation to commission disclosures, particularly alongside the motor finance and potentially premium finance issues.