Insurance Broker Fees
Insurance broker fees will typically add up to an overall profit of 15 percent of the policy premium. It’s important to factor any insurance broker fees into your budget as it’s going to impact how much you pay for coverage. You can avoid insurance broker fees altogether when you shop and buy insurance online. Start now with our free insurance tool below.
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UPDATED: Apr 12, 2022
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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.