Referrals and introducers: what a broker may pay for, and what the client must be told

Contents

1. Three structures, three sets of obligations
2. Where introducing stops and arranging starts
3. If you appoint an IAR, you own everything it does
4. What the client has to be told
5. Running the introduction on WhatsApp without tripping over consent
6. Frequently asked questions

Introductions are still how most commercial books grow. An accountant sends over a client who has outgrown their package policy, a broker in a different class passes a risk they cannot place, a satisfied fleet client shares your number in a WhatsApp group of hauliers. The awkward part arrives about a week later, when the introducer asks what is in it for them.

There is a workable answer, and it depends entirely on which of three structures you are in. Getting it wrong is not a technicality: an unauthorised person who does more than introduce is carrying on a regulated activity, and the firm that paid them is the one the FCA will want to talk to.

Three structures, three sets of obligations

Structure	What the introducer may do	What it costs you
Informal, unpaid referral (a happy client shares your number)	Anything a member of the public may do	Nothing special — but the prospect still has data protection rights from your first message
Unauthorised paid introducer relying on the RAO exclusions	Pass contact details, and nothing more	A contract limiting their activity, monitoring that it stays limited, and disclosure of the fee
Introducer appointed representative (IAR) under section 39 FSMA	Effect introductions and distribute non-real-time financial promotions you have approved	Full principal responsibilities: due diligence, FCA notification, oversight, annual review

Most brokerages want the middle row and drift into the bottom one without noticing.

Where introducing stops and arranging starts

An unauthorised introducer avoids needing authorisation by relying on exclusions in the Regulated Activities Order — principally article 33B (provision of information) and article 72C (provision of information on an incidental basis). The FCA's guidance in PERG 5 is blunt about the limit: the exclusion is available where the person is merely providing information and takes no additional steps to assist in the conclusion of the contract of insurance.

In practice the line gets crossed by things that feel helpful rather than regulated:

• Helping the client fill in a proposal form or a statement of fact.
• Explaining what a policy covers, or commenting on whether a limit looks adequate.
• Collecting the client's risk details and sending them to you as a completed submission.
• Chasing the client for documents on your behalf, or relaying your terms back to them.

PERG 5 also flags a structural test that catches lead generators: where an introducing business depends on insurance distribution for its existence, the case for authorisation strengthens, and a firm whose main activity is sourcing insurance leads is unlikely to get home on article 33B. An accountant who occasionally passes a client is a different animal from an agency selling you contact lists — and paying the second one per lead is exactly the arrangement that attracts attention.

Write the limit into the agreement in operational language, not just regulatory language. "You may give the client our name, telephone number and website, and tell them which classes we write. You may not discuss cover, price, terms or suitability" is a sentence an office manager can actually follow.

If you appoint an IAR, you own everything it does

An introducer appointed representative is an appointed representative whose scope of appointment is limited to effecting introductions and distributing non-real-time financial promotions relating to products available from you or your group. It explicitly does not extend to arranging or advising, or to any activity that might reasonably lead a customer to believe the IAR can advise them.

The appeal is obvious: the IAR needs no authorisation of its own, because under section 39 FSMA you accept responsibility for what it does. That is also the catch. Since the FCA's 2022 changes to the appointed representatives regime, principals carry a heavier load:

1. Due diligence before appointment — competence, financial position, business model, and the fitness and propriety of the people running it.
2. Notification to the FCA through Connect at least 30 calendar days before the appointment starts.
3. Ongoing oversight proportionate to the risk, with clear grounds and an orderly process for termination.
4. An annual review of the AR's activities, plus a documented self-assessment of your own adequacy as principal.

For a single introducer who sends you three cases a year, that is a great deal of machinery. Most brokerages are better served by the unauthorised-introducer route with a tight contract, and should reserve IAR status for a genuine ongoing distribution relationship.

What the client has to be told

Disclosure is where introductions most often go quietly wrong, because the introducer assumes you are handling it and you assume the client already knows.

• Status disclosure. A firm whose contact with the customer is limited to effecting introductions need only give its identity, address and whether it belongs to the same group as the firm it introduces to (ICOBS 4.1.3R). Go beyond an introduction and the full status disclosure in ICOBS 4.1.2R applies.
• Nature of remuneration. Before the contract is concluded, and again on amendment or renewal, you must tell the customer the nature of the remuneration you receive and whether you work on a fee, commission or other basis (ICOBS 4.3.-7R). The duty flows from Article 19 of the IDD, so Irish, Dutch and German intermediaries face the equivalent under their own implementations.
• Fees. Where a fee is payable by the customer, disclose the amount before they incur liability to pay it or before the contract is concluded, whichever is earlier — and cover fees that may be charged later in the life of the policy (ICOBS 4.3.1R and 4.3.2R).
• Commercial customers on request. On a commercial customer's request you must promptly disclose, in cash terms and in a durable medium, the commission that you and any associate receive in connection with the policy (ICOBS 4.4.1R). "Any associate" is the phrase that reaches the referral fee you paid out.

Where the introducer is unauthorised and paid, telling the client about the arrangement is not merely good manners. An undisclosed payment to someone the client believed was giving impartial guidance is the fact pattern that turns a routine file review into a complaint.

Running the introduction on WhatsApp without tripping over consent

The mechanics matter, because introductions increasingly arrive as a forwarded contact card. Three practical points.

First, an introduced prospect has not opted in to anything. Your first outbound message on the WhatsApp Business Platform falls outside any service window and therefore has to be an approved template, and you need a lawful basis and a fair processing notice for using a number a third party handed you. Our note on prospecting SME clients within PECR and the GDPR sets out the electronic marketing side in detail.

Second, capture the provenance at the moment of introduction rather than at renewal: who introduced, on what date, whether a fee is payable, and what the client was told. In ORIS that sits on the customer record with the source and opt-in state attached, so the answer is one lookup rather than a search through an adviser's phone — and introduced clients become a segment you can actually report on.

Third, make the first message do the disclosure work. A template that names your firm, says who suggested you get in touch, and states plainly whether that person is paid for the introduction removes a conversation nobody enjoys having later. Our client referrals use case and the referral invitation template give you wording to adapt, and there is more on winning new business in our sales writing.

Frequently asked questions

Can we pay a client a small thank-you for a referral?

Generally yes, provided the client does no more than pass on your details and the arrangement is not dressed up as advice. Keep it modest and consistent, document it, and be ready to disclose it — a commercial customer can ask what you and your associates received in connection with their policy.

Does an unauthorised introducer need a written agreement?

No rule says you must have one, but without it you cannot show what the introducer was permitted to do or that you monitored the limit. Given that their overstepping becomes your problem, the agreement is the cheapest control available.

What is the practical difference between an introducer and an IAR?

An introducer is unauthorised and relies on an exclusion, so you carry no regulatory responsibility for them beyond your own conduct. An IAR is appointed under section 39 FSMA and you take responsibility for what it does, which brings notification, oversight and annual review duties.

Can an introducer send our marketing material to their contacts?

An IAR may distribute non-real-time financial promotions relating to your products, within the scope you approve. An unauthorised introducer relying on the information exclusions should not be pushing promotional material, because that is a step beyond merely providing information.

Do these rules apply the same way in Ireland or the Netherlands?

The remuneration disclosure has a common source in the IDD, so the substance travels. The authorisation architecture does not: appointed representative status is a UK construct, and the Central Bank of Ireland and the AFM run their own registration routes for tied and ancillary intermediaries.