Gross-rated commission

~3 min read

Category: Distribution · Reviewed by Apex Insurance Brokers · Last reviewed 2026-06-05

In short: Gross-rated commission is the standard broking remuneration arrangement under which the insurer quotes a gross premium inclusive of commission to the broker, and the broker retains its agreed percentage commission at the point of premium collection. It contrasts with net-rated commission, in which the broker adds its own margin to a net price.

Category: Distribution and intermediation Also known as: Gross-rated, Gross rate, Commission inclusive Regulatory basis: FCA Handbook ICOBS 4.3, ICOBS 4.4 Related concepts: Net-rated commission, Commission (insurance), Override commission

Definition

Under a gross-rated arrangement the insurer’s quoted premium is the same figure as is quoted to the client (inclusive of commission), and the commission level is established by negotiated agreement between insurer and broker or by standard scheme terms. Typical retained commission rates are 10-25% depending on product and market.

Legal / Regulatory basis

ICOBS 4.3 requires disclosure of the amount of any commission to commercial customers on request. ICOBS 4.4 (since 2018) requires automatic disclosure of cash commission amounts to retail customers in writing. The Insurance Distribution Directive Article 17 requires the firm to manage conflicts of interest including those arising from differential commission rates as between insurers.

How it works in practice

A standard SME commercial combined placement at 22.5% gross-rated commission means: insurer quotes £10,000; broker collects £10,000 plus IPT from client; broker remits £7,750 to insurer (net of commission). The commission is the broker’s remuneration for placement, mid-term servicing, claims advocacy and account management.

Common variations

A flat rate commission applies the same percentage to the entire premium. Stepped commission applies different percentages to different premium bands or product elements. Sliding scale commission varies the rate by some external measure (e.g., loss ratio or volume). Override commission is additional commission on top of the standard rate (see Override commission).

Example

A £25,000 directors’ and officers’ insurance premium at 22.5% gross-rated commission: gross to client £25,000; commission £5,625; net to insurer £19,375. The 22.5% rate is set by negotiated agency agreement between broker and insurer or by Lloyd’s scheme terms.

References

FCA Handbook ICOBS 4.3, 4.4 — https://www.handbook.fca.org.uk/handbook/ICOBS
Directive 2016/97/EU (IDD), Article 17
FCA Thematic Review TR19/2

This entry is part of the Apex Insurance Wiki. Last reviewed by Apex Insurance Brokers on 2026-06-05. Next review: 2026-12-05.

Apex Insurance Brokers Limited. Authorised and regulated by the Financial Conduct Authority, FRN 724952. Registered in England and Wales, Companies House 07014570. This entry provides general information about UK insurance concepts and is not regulated advice. Consult your insurance broker on your specific position.

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