Liquidator takes tough stance on return of broker commission

PricewaterhouseCoopers (PWC) has offered a compromise to Independent Insurance's brokers over the return of commission, with a steely footnote: this is our final offer and we will not negotiate.

On 6 June PWC released the details of the deal it hammered out with a group of brokers who represented Independent's 800-plus agency brokers.

Last week, PWC liquidator Dan Schwarzmann had been at loggerheads with a small sub-group of brokers over the return of commission on the unexpired portion of policies.

Schwarzmann wanted the entire amount handed back.

However, brokers refused to return commission on the unexpired portion of policies until PWC returned the unexpired premium to their clients.

The deadlock had threatened to derail the agreement, which required complete industry acceptance to go ahead.

In the final version of the deal, Schwarzmann has offered to accept the return of 50% of the commission on the unexpired portion, with the other 50% to be paid to clients when PWC returned their unexpired premiums.

Schwarzmann said any dividend would be paid to brokers net of the 50% commission, leaving brokers responsible for passing on the gross dividend to their clients.

His letter to brokers emphasised: "These are major concessions and therefore this is my final, non-negotiable offer to brokers."

He warned that if brokers did not accept the deal, he would commence legal proceedings against them.

"For the avoidance of doubt, any such proceedings would also include claims for both interest and costs," Schwarzmann said.

The rest of the settlement offer comprises:

  • Brokers to pay PWC time-on-risk premiums held, net of time-on-risk commission, within two weeks of final settlement contracts being signed.

  • Brokers to collect time-on-risk premiums not held, but due from policyholders, and pay PWC within three months of contracts being signed.

  • Any time-on-risk premiums paid outside these timescales, with the exception of mid-term adjustments and declaration premiums, are to be paid gross of time-on-risk commissions, with brokers ranking as unsecured creditors for their pro-rate commission due.

    Schwarzmann will hold a meeting on 13 June in Birmingham to clarify, not negotiate, the terms of the deal.

    Brokers must tell PWC by 19 June whether they accept the deal.

    British Insurance Brokers' Association (Biba) chief executive Mike Williams said Biba would send out an information bulletin highlighting "issues" surrounding the deal.

    "We can't advise whether anyone should accept it or not," he said.

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