Category: Distribution · Reviewed by Mark Fox, Broker · Renewals · Last reviewed 2026-06-05
An insurance broker is an authorised intermediary whose primary legal duty is owed to the insured (the client), not to any insurer. The broker advises on cover, negotiates terms across the market and arranges placement, typically remunerated by commission paid by the insurer out of premium.
Category: Distribution and intermediation Also known as: broker, general insurance broker, commercial broker Regulatory basis: FSMA 2000; FCA Handbook (ICOBS, MIPRU, SUP); Insurance Distribution Directive (Directive 2016/97/EU) Related concepts: insurance agent, independent intermediary, commission
A broker is an insurance distributor whose agency lies with the client. The classic English authority is North & South Trust Co v Berkeley [1971] 1 All ER 980, in which Donaldson J held that a broker placing risks at Lloyd’s is the agent of the assured, and that acting also as the insurer’s agent for claims gave rise to an irreconcilable conflict. The principle remains foundational: the broker owes fiduciary duties of skill, care and disclosure to the client and must place the client’s interests above its own commercial interest.
Brokers distinguish themselves from tied or multi-tied agents by access — they can in principle approach the whole market, although in practice many specialise by class, sector or geography. They differ from insurance agents proper, who act for the insurer, and from IFAs, who advise on retail investment products and life cover under a separate FCA regime.
In the UK, brokers must be authorised by the FCA under Part 4A of the Financial Services and Markets Act 2000 to carry on the regulated activities of arranging deals in, and advising on, contracts of insurance (Regulated Activities Order 2001, articles 25 and 53). Conduct is governed by the FCA Handbook, principally ICOBS for general insurance, the prudential rules in MIPRU, and the supervisory framework in SUP. The Insurance Distribution Directive (Directive 2016/97/EU), implemented in 2018, imposes harmonised demands and needs, disclosure and product oversight obligations across the EU and was retained in UK law post-Brexit.
A broker’s workflow runs from client onboarding and demands-and-needs analysis, through market submission and quotation, to placement, mid-term adjustments and renewal. Remuneration is typically by commission (“brokerage”) deducted by the insurer from gross premium — commonly 10-30% in commercial lines — or by client fee, or a combination. ICOBS 4.3 requires commercial customers to be told, on request, the nature and amount of remuneration; for retail customers ICOBS 4.4 requires unprompted disclosure of certain conflicts. Brokers must hold client money under CASS 5 unless they have risk transfer from the insurer.
Variations include retail brokers (consumer general insurance), commercial brokers (SME and corporate), wholesale brokers (placing into Lloyd’s or specialty markets via other brokers), and reinsurance brokers (regulated under separate Lloyd’s and FCA frameworks). The term “intermediary” is the FCA’s generic Handbook term and includes brokers, agents and appointed representatives.
A construction SME asks its broker to place a £5m professional indemnity policy. The broker conducts a demands-and-needs review, approaches six markets, recommends an A-rated insurer at £8,750 gross premium, and discloses to the client that it earns 22.5% gross commission (£1,968.75) plus a 2.5% override under a binder facility. The broker remains the client’s agent at placement and at any subsequent claim.
This entry is part of the Apex Insurance Wiki. Last reviewed by Matt Bartlett 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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