Global Employee Benefits Consulting Commission and Fee Disclosures; An Asinta Insight Report
In response to new U.S. legislation requiring brokers and carriers to disclose commissions, Asinta queried its employee benefits consulting Partners from around the globe to create this report on Global Employee Benefits Consulting Commission & Fee Disclosures which includes disclosure requirement fundamentals from 26 countries Asinta represents.
Armenia
The Central Bank of Armenia (the regulatory body) requires disclosure and transparency. One essential requirement is to show the brokerage receivable by the client or demonstrate the company has two different accounts; one for the client’s money and one for the company’s money. Reports are submitted either quarterly or on an annual basis.
Bosnia & Herzegovina
Brokers must submit annual reports, which include commissions, fees, contracts with carriers, and premiums per line of insurance to both the Supervisory Agency of the Federation of Bosnia and Herzegovina and the Supervisory Agency of the Republic of Srpska. These agencies are responsible for the insurance and brokerage market. Carriers have identical obligations to these supervising agencies and submit reports disclosing the cooperation agreements for each broker relationship. Commission disclosure to clients is not required, but upon request, the information is, of course, provided.
Brazil
Brokers must disclose commissions to the client on the proposal. Also, local governments’ insurance regulators (SUSEP) may perform an audit on commissions. Carriers are not involved.
China and Hong Kong
No regulation applies to commission and fee disclosure.
Colombia
Providing information regarding broker remuneration is not required. However, if requested, it is delivered. In addition, carriers provide annual reports to brokers regarding commission matters.
Croatia
The only requirement is to inform clients about the commissions for specific policies upon their request.
Czech Republic
Commission disclosure occurs upon the client’s (commercial counterparts only) request, and there is a trend towards even more transparency going forward. Typically, the report contains the commission rate and/or the detailed commission amount received within a specific time frame (to cover any premium adjustments). In addition, the Czech National Bank requires carriers to provide commission reporting.
Estonia
The Financial Supervision Authority requires commissions and fee reporting twice each year. Clients also require disclosure. Every client sees broker commissions and fees with the policy coverage offer. It’s called the ‘information sheet’ and includes commissions and where clients should report complaints. Reports are submitted online and disclose GWP (gross written premium), commissions, fees earned/mediated by every line of insurance and carrier. Carriers must report their data to the Financial Supervision Authority in a similar way.
Hungary
No regulation applies to commission and fee disclosure.
Ireland
A new legal requirement mandates a commissions summary showing all possible commissions and remuneration possibilities to consumers under the Central Bank’s Amendment to the Consumer Protection Code.
The requirement ensures consumers have transparency of commission arrangements between intermediaries/brokers and product producers. Free hospitality for intermediaries/brokers such as golf trips and sporting event tickets and other forms of hospitality are also prohibited under these rules.
Companies with an annual turnover above €3M domestically are not considered Consumers, and the disclosure requirement does not apply in this case.
Any consumer can access this broad summary of commission arrangements which encompasses all providers. There are no government agencies that require client-specific commission data. The ‘terms of business’ document includes a summary of fees in addition to any specific policy-related commission details. So that members may incorporate these details via websites, and give clients on-demand access, summaries of commission arrangements available to Brokers Ireland (industry association) are also provided.
Italy
Clients must receive disclosure information from the broker when issuing the policy contract about broker commissions, fees, or a combination of the two. Disclosure of the fee calculation method is included as well. For life and pensions, the carrier must disclose the product content.
Japan
No regulation applies to commission and fee disclosure.
Kazakhstan
The brokerage commission and fee amounts are disclosed in the broker’s documents (Cover Note and Slip) and in a quarterly report to the National Bank of Kazakhstan. The quarterly report contains information on the type of risk, insured, insurer, insurance value, premium, and percent of brokerage commission. For clients, the brokerage commission is disclosed in the broker’s documents.
Lithuania
The Bank of Lithuania supervises insurance companies and brokers, and insurance brokerage firms must disclose commissions to policyholders, insured persons, and beneficiaries. However, there is no specific reporting structure. In addition, the client proposal contains the broker’s commission.
Mexico
All insurance policies have a clause that states insurance companies must disclose the broker’s commission or bonuses at the client’s request. It is not mandatory to disclose the broker’s income unless the client requires it, and international clients usually ask if the broker will charge them fees or commissions by percentage. Agreement to fees occurs before signing the client contract. Insurance companies must disclose broker commissions and any other broker income within the next 30 days following the client’s request. In their answer, they should include the following:
- Net premium
- Policy fees
- Value Added tax (VAT) if applicable
- Total premium
- Commission percentage
- Commission gross amount
The National Commission of Insurance and Surety Bonds (CNSF or Comision Nacional de Seguros y Fianzas) regulates all insurance contracts. The CNSF falls under the Ministry of Finance and Public Credit (SHCP or Secretaria de Hacienda y Credito Publico).
Poland
Insurance brokers are required to advise clients that brokers collect remuneration (either commission or fees), with the commission model being the most common. Disclosing the commission amount or percentage is not required. However, if clients or partners request this information, it is shareable.
Romania
No regulation applies to commission and fee disclosure.
Russia
Currently, only tax authorities during tax audits have the right to request all financial information from carriers and brokers (including the amount of broker commission). However, there is a trend towards more transparency for any deal involving intermediaries (not only in the insurance market). For example, in a newly amended law on the organization of insurance business in Russia, a clause requires insurance intermediaries to disclose broker commissions by percentage upon the client’s request. In addition, tax authorities are more frequently requesting information to ensure clients receive their remuneration disclosure documentation. Therefore, clients are somewhat forced to request this information.
Singapore
Commission disclosure is required only for corporate group term life regarding the commission indicated on the quote. For individuals, the product summary discloses commission by default. The Monetary Authority of Singapore manages this, and the Life Insurance Association of Singapore and the General Insurance Association of Singapore implement it.
Slovakia
Commissions disclosure occurs upon the client’s request (commercial counterpart only). Therefore, there is no specific prescribed form for the report. Still, typically the commission rate is disclosed, and/or the detailed amount of commission received within a particular time frame (to cover any premium adjustments).
Carriers do not have any specific reporting requirements. Still, the government will require carriers to split each premium amount among the premium debit note sections of premium and commission and insurance premium tax.
Slovenia
The only requirement is to inform clients about the commissions for specific policies upon their request.
Spain
There is no commission disclosure requirement, but this may change over time. Generally, insurance business line terms must be disclosed annually to the DGSFP (Dirección General de Seguros y Fondos de Pensiones), Spain’s insurance regulating authority. Carriers disclose all their operations, including premiums received and commissions paid to brokers, to the DGSFP.
Switzerland
Clients must receive an annual report with full disclosure of a broker’s commissions. In addition, some carriers also disclose commissions paid on the ‘annual collective certificates’ (pension) for each client.
Thailand
No regulation applies to commission and fee disclosure, but some agreements set maximum life and medical insurance commissions.
United Arab Emirates (UAE)
The UAE Insurance Authority receives annual commission reports from brokers for life and savings products. In addition, upon request, brokers provide a commission schedule for remuneration on group life and disability products.
The authority’s landmark regulations set an overall commission cap on selling savings and protection products, life insurance, and family Takaful products (Shariah-compliant). In addition, they banned commission on indemnity products as of October 15, 2020.
The regulation does not affect group medical insurance, but group life and disability insurance commission is capped at 10% of the annual premium. The law may change in the next few years, but capping and disclosing commission currently applies to savings and protection policies only.
United Kingdom
There is no legal or regulatory requirement to disclose the monetary or percentage amount of commission to an employer; however, it is best practice and transparent to do so. For fees, advisers should disclose the fee for the service(s) they perform.
There is a gradual move towards disclosing commission to employers—for example, discloser of earned commission by percentage and monetary amounts. Engagement/appointment letters and market review reports contain this information. Carriers add the percentage and sometimes monetary amount included in the quote (renewal document) paid to the adviser.
United States
There are new compensation disclosure requirements for brokers/consultants to ERISA covered group health plans for contracts entered into, extended, or renewed on or after December 27, 2021.
These rules apply to group health plans, including dental and vision plans that are excepted benefits. They do not apply to STD, LTD, AD&D, life insurance, or other “voluntary” benefits. The disclosure must be in advance of the client’s decision to work with a broker, and annually thereafter.
The disclosure must contain a description of:
- The services to be provided, a statement of the entity’s fiduciary status, and a description of “compensation” received for services.
- Compensation paid among the CSP, its affiliates, and subcontractors if it is set on a transaction basis (e.g. commissions, finder’s fees or other incentive-based compensation related to the contract for services).
- The services for which such “shared compensation” is paid and identify each payer and recipient (including status of recipient as an affiliate or subcontractor).
- Any compensation expected to be received in connection with the termination of the contract or arrangement.