Written By: Shuman RoyReviewed By: Joel OhmanUPDATED: Jun 6, 2022Fact Checked

Depending on where you live, and what type of insurance you need, insurance broker fees may be very important to you, as they can account for a decent chunk of your insurance budget. Of course, everybody has to get paid for the work they do. Insurance brokers are no different. They charge insurance carriers for their services, and carriers build that commission into the premiums.

In the past, there have been some discussions among brokers about charging for the quoting process. Especially with the availability of free online quoting services, this didn’t go far. This doesn’t mean there are no insurance broker fees, even for an online broker.

But to understand insurance broker fees, you need to understand the difference between an insurance agent and an insurance broker.

Captive Agent: Represents the insurer. An employee of the insurance company they sell for, i.e. State Farm agents – similar to a grocery bagger, who works directly for their company. A captive agent can quote multiple products as long as they’re from the company they work for.

Independent Agent: “Represents” multiple companies by contract. Agent’s “loyalty” is with the companies they represent. In fact, the contract they sign in order to offer various products from different insurers clearly dictates that fact. An independent agent can quote products they’re licensed to sell from a range of insurance companies.

Insurance agents earn commission based on the overall insurance premium they “produce,” typically between 10-20 percent. A $1,000 insurance policy may earn an agent between $100 and $200, plus a commission if the policy renews.

Whether a captive agent or an independent agent, insurance agents are responsible to vet potential insureds and gather information for the insurance company. Independent agents bring in business partly by doing this for multiple companies to give customers multiple options.

Can insured parties pay broker fees directly?

An insurance agent can bring in business for insurance companies. They’re also a key part of getting customers to renew. Of course, some agents have also been known to churn plans by requoting entirely new policies on a frequent basis to collect new commissions. Instead of constantly paying new commissions, insurance companies may offer a servicing fee to brokers to service insurance claims, renewals, and other everyday needs.

Commissions may be greater for non-standard auto insurance policies if the premiums are higher. Generally, insurance companies pay commissions as a certain percentage of the total policy premium. These commissions cannot be passed along to the insured to lower rates. When there’s an independent agent involved, the commissions are always paid directly from the insurance carrier to the agent or brokerage.

[Insurance policy cancelled?]

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Shuman Roy is an entrepreneur, business owner, and musician. He started RoysNoys, LLC in 2013 as a music production and education service company. He also offers small business consulting and advisory services to help businesses get from start-up mode to turn-key operations. Shuman earned his M.B.A from the Stern School of Business in 2001 and has an undergraduate degree from Manhattan College in ...

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Written by Shuman Roy
Content Writer & Entrepreneur Shuman Roy

Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Joel...

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Reviewed by Joel Ohman
Founder, CFP® Joel Ohman