Richard Waters

Head of Strategic Partnerships, Omni Protect

For decades, indemnity commission has been the default remuneration model in UK protection advice. It has served the industry well, providing advisers with upfront income to invest in growing their businesses while helping millions of consumers secure valuable protection.

But the market is evolving, increasingly, advisers are no longer asking whether indemnity or non-indemnity commission is the“ better” model. Instead, they are asking a more important question.“ Which commission structure best supports the business we’ re trying to build”?

That shift reflects a growing focus on business sustainability, predictable income, consumer outcomes and long-term value.

Under the more traditional model, an indemnity commission structure, advisers receive most or all of their commission at the point a policy starts, based on the assumption that the client will retain the policy for its expected term.

The obvious advantage is immediate cashflow, allowing firms to invest in people, marketing and future growth.

However, if policies lapse during the indemnity period, typically within the first four years, commission clawback can occur, creating unexpected repayment obligations and introducing financial volatility. For many firms, this has simply become accepted as part of running an advice business.

Non-indemnity commission takes a different route. Rather than advancing future commission, remuneration is paid over time as premiums are collected. Income grows gradually, but with no clawback exposure.

While this means lower income in the early stages, total commission paid is higher and it creates something many businesses increasingly value:

• predictable recurring revenue

• improved cashflow forecasting

• reduced financial volatility

• stronger income resilience.

Perhaps more importantly, remuneration remains directly linked to policies remaining in force, naturally rewarding advisers who continue delivering value to their clients.

12 | Protection Adviser Online