We, Cleary Barker act as intermediary (Broker) between you, the consumer, and the product provider with whom we place your business.
The background
Pursuant to provision 4.58A of the Central Bank of Ireland’s September 2019 Addendum to the Consumer Protection Code, all intermediaries, must make available in their public offices, or on their website if they have one, a summary of the details of all arrangements for any fee, commission, other reward or remuneration provided to the intermediary which it has agreed with its product producers.
What is commission?
For the purpose of this document, commission is the payment earned by the intermediary for work undertaken on behalf of both the provider and the consumer. The amount of commission is generally directly related to the quantity or value of the products sold.
There are different types of commission models:
- Single commission model: where payment is made to the intermediary shortly after the sale is completed and is based on a percentage of the premium paid/amount invested/amount borrowed.
- Trail/Renewal commission model: Further payments at intervals are paid throughout the life span of the product.
Indemnity commission
Indemnity commission is the term used to describe a commission payment made before the commission is deemed to be ‘earned’. Indemnity commission may be subject to a clawback (see below) if the consumer lapses or cancels the product before the commission is deemed to be earned.
Other forms of indemnity commission are advances of commission for future sales granted to intermediaries in order to assist with set up costs or business development.
Life Assurance/Investments/Pension products
For Life Assurance products commission is divided into initial commission and renewal commission (related to premium), fund based or trail relating to accumulated fund.
Trail commission, bullet commission, fund based or renewal commission are all terms used for ongoing payments. Where an investment fund is being built up though an insurance-based investment product or a pension product, the increments may be based on a percentage of the value of the fund or the annual premium. For a single premium/lump sum product, the increment is generally based on the value of the fund.
Examples of products include Life Protection, Regular Premium Life Assurance Investments, Single Premium (lump sum) Insurance-based Investments, and Single Premium Pensions.
General insurance products
General insurance products, such as motor, home, travel, health, retail or liability insurance, are typically subject to a single or standard commission model, based on the amount of premium charged for the insurance product.
Profit Share arrangements
In some cases, the intermediary may be a party to a profit-share arrangement with a product provider and will earn additional commission. Any business arranged with these product providers on a client’s behalf will be placed with the product provider because that product provider is at the time of placement, the most suitable to meet the client’s requirements, taking all the client’s relevant information, demands and needs into account.
Investments
Investment firms, which fall within the scope of the European Communities (Markets in Financial Instruments) Regulations 2007 (the MiFID Regulations), offer both standard commission and commission models involving initial and trail commission. Increments may be based on a percentage of the investment management fees, or on the value of the fund.
Clawback
Clawback is an obligation on the intermediary to repay unearned commission. Commission can be paid directly after a contract is concluded but is not deemed to be ‘earned’ until after a specified period of time. If the consumer cancels or withdraws from the financial product within the specified time, the intermediary must return commission to the product producer.
Fees
The firm may also be remunerated by fee by the product producer such as policy fee, admin fee, or in the case of investment firms, advisory fees.
Other Fees, Administrative Costs/ Non-Monetary Benefits
The firm may also be in receipt of non-monetary benefits such as:
- Attendance at product provider seminars.
Providers
The Life Insurance providers that our firm deals with are:
The General Insurance Providers that our firm deals with are: