These guidelines which are issued pursuant to subsection 185(2) of the Insurance Act 1996 may be cited as the Insurance and Takaful Brokers’ Brokerage/Fee Sharing Guidelines.

These guidelines are designed to :-

1. Promote healthy growth of the insurance and takaful broking industry.

2. Ensure that sharing of brokerage/fee in any form does not affect or result in:-
   1. Breach of the Code of Ethics and Conduct and other rules of the Malaysian Insurance and Takaful Brokers Association (MITBA), guidelines issued by Bank Negara Malaysia (BNM) and the laws of Malaysia;

   2. Any deterioration of the standard of professional services to clients; and

   3. Conflict with national objectives, lack of transparency and possible conflict of interest.

3. Have a uniform and sound basis of brokerage/fee sharing for observance by all members of MITBA.

Brokerage/Fee sharing can take the following forms:-

1. Co-Brokers/Brokers Consortium

   Brokerage/fee may be shared between two (2) or more appointed Malaysian brokers where an account is managed on co-broking or brokers consortium basis.

2. Business Introducer

   A brokers’ business introducer may be an individual person or a body corporate(and include any subsidiary or associate of the client’s company or its co-operative as the case may be) and include broker’s overseas associate or any other foreign broker. The business introducer works to assist the broker to secure the business. The business introducer may assist in public relation work and in securing the payment of premium to the broker as well as any other work that the broker may from time to time assign to him. Overseas brokers may also provide technical expertise input and assistance in securing and servicing of an account so introduced.

3. Technical Assistance

   A Malaysian Broker may pay a percentage of the brokerage/fee for the services of a foreign broker in the procurement or servicing of a specialized class of insurance namely aviation/space, oil and gas/energy, marine hull/liability, or such class of risks as determined to be specialized in accordance to The Large and Special Insurance Scheme.

1. There shall be no sharing of brokerage/fee otherwise than as provided for in these guidelines.

2. An arrangement for sharing of brokerage/fee may be in a written form of agreement, and duly approved by the management and subsequently tabled and approved/duly noted by the broker’s board of directors.

3. All payments in respect of brokerage/fee sharing must only be out of the brokerage/fee received on such specific account introduced and must not be from:-
   1. total brokerage/fee income of the broker; or

   2. any dual rating structure.

4. The agreement on brokerage/fee sharing must specify:-
   1. the client or account under which the brokerage/fee is being shared;

   2. the basis of sharing and its duration or tenure;

   3. the form and manner of payment of brokerage/fee;

   4. terms of reference, responsibility and authority of each party;

   5. agreed method of solving any disputes or problems arising from the agreement;

   6. terms of termination of agreement during its tenure; and

   7. the business introducers are not permitted to collect premiums. The collection premium is primarily the responsibility of the broker.

5. The agreement must ensure that the broker primarily responsible for the account shall have sufficient brokerage/fee to meet the cost of servicing while maintaining the required professional standard, subject to a minimum brokerage/fee as stipulated under Items 5 (a) (vi), 5(b) (ii) 5(b) (iii) and 5 (c).

6. A Broker may refer any differences or problems relating to the interpretation of these guidelines to BNM for deliberation and approval.

7. The objectives stated in Item 2 shall form part of the general guidelines.

8. The Broker must declare and must obtain an acknowledgement receipt thereof at the end of each financial year all payments of introducers’ fees to the Inland Revenue Board or any other Government Bodies as may be required by any law/guidelines.

In addition to the general guidelines, the following guidelines shall apply to each category of brokerage/fee sharing agreement:-

1. Co-Brokers/Brokers Consortium
   1. There must be concrete evidence that professional service has been rendered by the licensed insurance or takaful brokers/consortium of brokers.

   2. All transaction including payment of brokerage/fee sharing must be transparent.

   3. Any agreement between the brokers shall contain no provision to the detriment of the client.

   4. The agreement shall specify the lead broker.

   5. There shall be a provision in the agreement that all decisions shall be by consensus, but where there is any disagreement, the majority (determined by the percentage of brokerage/fee sharing or any other agreed method) shall prevail, with the lead broker having one (1) extra vote in the case of a 50-50 situation.

   6. Where an overseas broker secures an overseas account through the introduction by the Malaysian broker, the Malaysian broker shall endeavour to secure a minimum brokerage/fee of not less than 30% of direct brokerage/fee, subject however to prevailing laws/legislation in that country as the case may be.

2. Business Introducers
   1. The following persons/body corporate shall not qualify as a broker’s business introducer:-

      - The broker’s own employees including directors unless the agreement on any brokerage/fee sharing forms part and parcel of the remuneration package of such employee or director and was duly approved by the board of directors;

      - Immediate family members, servants and agents of the broker’s own employees and directors. These shall include employee’s/director’s spouses, children, parents and household servants;

      - Any other company in which any employee/director of the broker having controlling interest unless this is made known and approved by the broker’s board of directors;

      - In respect of the broker’s client itself, the client’s own employees/directors including their immediate family members as stated above; and

      - Any company where any person above has controlling interest, unless expressly approved by the board of director’s client.

   2. Where a Malaysian client, is secured through the introduction and/or assistance of the broker’s associate broker overseas, or any other foreign broker, the Malaysian broker shall retain a minimum of 70% of all direct brokerage/fee on the specific account introduced.

   3. To ensure that the broker’s service is duly compensated and not unduly affected, the minimum brokerage/fee that the broker retains for itself shall not be less that 70% of the total direct brokerage/fee on the specific account introduced.

   4. No business introducer is allowed to work for more than one (1) broker on any one specific account.

3. Technical Assistance

   Where an account is secured with the assistance of a foreign broker who provides technical expertise, input and/or related services in respect to securing and servicing of the account, the Malaysian broker shall endeavour to retain a minimum brokerage/fee of 70% but may retain any other percentage no lesser than 50% of the brokerage/fee on specialized risks as mentioned in Item 3(c) above provided such percentage is approved by the Malaysian broker’s board of directors.