already monitor policy replacement activity very closely – it has long formed part of the remit of their distribution quality management teams – so they are arguably well placed to take action should they believe it necessary.
Could we see providers take their own stance?
We know that some providers are already exploring a move towards 4 year terms as standard, and this opens an interesting discussion. Could we see a situation similar to the way cancellation fees have evolved? The FCA allows cancellation charges, provided they are fair, clear, and reasonable. In practice, though, many providers will refuse agencies or offer non – indemnity only, where commission is paid monthly, if firms charge a cancellation fee, particularly if it is in line with commission clawback.
This creates the possibility that providers might set their own expectations, separate from any future regulatory direction, and choose to operate exclusively with 4 year commission structures. If that happens, firms may not have a regulatory push forcing them in that direction, but they may be nudged along by provider policy.
From a business perspective, 4 year terms are not a negative. In fact, firms earn more under a 4 year model than under 2- year terms. Yes, there will naturally be some cancellations between months 25 and 48, but it is unlikely that these would outweigh the overall financial benefit for most firms. For many, the move could even support healthier, more stable revenue streams.
The wider context: a shift in behaviours, not an overhaul
What seems clear from the interim report is that the FCA’ s aim is not to undertake sweeping changes but to ensure the market encourages good consumer outcomes consistently. Their approach appears more evolutionary than revolutionary – focusing on tightening processes, reinforcing expectations, and discouraging behaviours that could lead to poor practice, even if isolated.
Commission will always be a topic that attracts strong opinions, but the findings suggest that the FCA recognises its role in supporting advice businesses, provided it is used responsibly. The focus is less about removing commission models entirely and more about ensuring they cannot inadvertently encourage unsuitable replacement activity.
What this means for firms right now
For most firms, the message is fairly reassuring. The feared removal of indemnity commission has not materialised in the interim review, and changes to 2 or 4 year terms appear unlikely at this stage. That said, commission remains a sensitive area, and firms should still be prepared to demonstrate that their advice, their replacement processes, and their income structures all support fair customer outcomes.
It is also worth remembering that the FCA has made it clear they will continue to monitor the market. Although the interim report gives a strong indication of their direction, further adjustments in the future are always possible if they believe consumer protection requires it.
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March 2026 | 11