Category: Distribution · Reviewed by Taylor Watts, Broker · New Business · Last reviewed 2026-06-05
Net-rated commission is a broking remuneration arrangement under which the insurer quotes a net premium to the broker and the broker adds its own margin to produce the gross premium charged to the client. The broker’s effective remuneration is the difference between the net premium remitted to the insurer and the gross premium collected from the client.
Category: Distribution and intermediation Also known as: Net-rated, Net rate Regulatory basis: FCA Handbook ICOBS 4.3, 4.4; Consumer Duty PRIN 2A Related concepts: Gross-rated commission, Commission (insurance)
Net-rated arrangements are commonly used in delegated underwriting, scheme business, and binders, where the broker holds underwriting authority or a binding authority and prices to the client. The broker negotiates the net rate with the insurer, then adds its margin. The total premium quoted to the client (gross) includes broker margin, IPT and any other taxes or levies.
Net-rating is permitted under FCA rules, subject to: (1) ICOBS 4.3/4.4 disclosure of remuneration (broker margin must be disclosed to commercial customers on request and to retail customers automatically); (2) the Insurance Distribution Directive’s product oversight and governance requirements (PROD 4) — the broker as co-manufacturer must ensure the gross premium delivers fair value; (3) the Consumer Duty’s products and services and price and value outcomes (PRIN 2A.4, 2A.5) — particularly post-2023 for retail products. The FCA Thematic Review TR19/2 highlighted risks in distribution chain pricing.
A typical net-rated scheme arrangement might involve the insurer providing the broker with a net rate of, say, £250 per vehicle for a fleet motor scheme; the broker adding £75 margin (30% loading on net); and quoting £325 gross plus IPT to the client. Where the broker’s margin exceeds a reasonable level for the work performed, Consumer Duty and PROD 4 obligations require justification. The FCA has taken enforcement action where excessive net-rated margins have been identified, particularly in retail-facing products.
Net-rated arrangements may be combined with override or volume bonus payable by the insurer on retention or growth targets. Pure net-rating (with no insurer-paid commission) is distinct from “commission plus net margin” hybrid arrangements that are also seen in the market.
A motor trade scheme where the underwriter provides the broker with a net rate of £400 per vehicle; the broker adds 25% margin (£100) to produce a £500 gross premium; the broker discloses the margin to commercial customers on request and to retail customers as required by ICOBS 4.4.
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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