A Lloyd's broker is paid brokerage of £3,000 for placing a risk with an insurer having already agreed a fee for the work direct with the client of £4,000. What action is the broker most likely to take?

In situations where a Lloyd's broker is involved, the handling of payments and fees must align with regulatory and ethical standards. The correct course of action in this scenario is for the broker to rebate the brokerage received from the insurer to the client. This approach enhances transparency and trust in the broker-client relationship, ensuring that the client feels they are being treated fairly.

By rebating the £3,000 brokerage to the client, the broker maintains ethical integrity and adheres to industry norms, which often require that any remuneration received from insurers on behalf of a client should be disclosed and, when appropriate, returned to the client. This aligns with the principle that brokers should not profit twice from the same transaction without the client's knowledge and consent.

When brokers take both payments without informing the client, they risk violating fiduciary duties, which could lead to reputational damage and potential legal ramifications. On the other hand, negotiating more favourable policy terms in lieu of the brokerage does not directly address the client’s position regarding transparency and ethical practice. Overall, rebating the brokerage reflects the broker's commitment to responsible business practices within the insurance industry.