Brokers are up in arms after having their trail commission slashed from 27 per cent to 5 per cent by Paymentshield.
Money Marketing sister publication Mortgage Strategy understands that Paymentshield has sent letters to a number of brokers explaining that their commission will fall to 5 per cent from November 1 as they have not submitted any business with Paymentshield in the last 12 months.
This would mean a broker previously receiving £500 per month would now get just £93.
The insurance provider told brokers that by not submitting any business with them in the past year they had become a dormant agent and were therefore subject to changes in commission rates according to their contract.
It is believed that to receive their original level of commission brokers must submit one policy per month for six months to the firm.
A spokeswoman for Paymentshield says: “In line with the dormancy clause clearly stated in our terms and conditions, we can confirm that a number of brokers who are no longer active with Paymentshield have been notified of a change to their commission.
“However, should these intermediaries demonstrate a return to active submissions then their commission will return to its previous rate.”
One broker who contacted Mortgage Strategy says: “My firm is not dormant, it is still placing business, just not with Paymentshield, because it has become increasingly uncompetitive in recent years and I have a duty to find the best deal for my clients.”
Another broker says: “This move will cost intermediaries hundreds of pounds each month, threatening their businesses.”
General insurance distributor Safe&Secure says it is also surprised at the decision.
Jason berry, sales and marketing director of Safe&Secure, says: “It is a strange move by Paymentshield.”