Indemnity initial commission meaning

Indemnity initial commission is the upfront commission a product provider pays to an intermediary (for example, a broker or adviser) on a regular premium insurance or protection contract, such as a life policy. Although paid at or shortly after inception on an indemnity basis, it is treated as earned evenly over an agreed earnings period. If the policy lapses, premiums stop or the contract is cancelled during that period, the intermediary’s commission is typically clawed back on a pro‑rata basis, often via set‑off against future commission. This is a descriptive market term, not one defined in legislation or case law. Its operation is governed by the intermediary agreement and by conduct of business rules (in the UK, the FCA Handbook; in Ireland, Central Bank of Ireland requirements on inducements, disclosure and remuneration). Key features include: an agreed earnings/indemnity period; an advance calculated by reference to expected future premiums; and contractual clawback. The alternative is non‑indemnity (level) initial commission, paid as each premium is received. Usage and legal effect are broadly consistent across England & Wales, Scotland, Northern Ireland and Ireland, subject to local regulatory restrictions (including post‑RDR product scope in the UK).