What do insurance brokers do?
Insurance brokers are licensed professionals who specialise in helping clients navigate the complexities of insurance. They offer expert advice on a wide range of coverage options, including business insurance, personal insurances, and other specialised insurance products. In return for their services, brokers are typically compensated through commissions, broker fees, or a combination of both.
Broker commissions: paid by the insurance company
One of the most common ways insurance brokers earn income is through commissions. These broker commissions are paid directly by the insurance carrier and are usually calculated as a percentage of the annual premium paid by the client.
Importantly, the cost of the commission is already built into the insurance premium meaning the client doesn't pay an extra amount out of their pocket. Commission rates can vary depending on the type of policy, the insurance provider, and the broker’s agreement with the insurer.
Broker fees: paid by the client
In addition to commissions, some brokers may charge broker fees for specific services, especially when providing extra administration support, issuing or re-issuing of documentation, or complex insurance planning. These fees are paid directly by the client and must comply with Financial Conduct Authority regulations.
Broker fees must be:
- Reasonable and justifiable for the service provided
- Clearly disclosed in writing before any agreement is finalised
- Acknowledged and accepted by the client
Why this matters for businesses and individuals
Understanding how insurance brokers are paid, whether through commissions, fees, or both, can help you:
- Evaluate the cost of working with a broker
- Compare service offerings transparently
- Build a relationship based on mutual understanding
- Support compliance with relevant insurance laws
By working with a transparent, knowledgeable broker, you gain a trusted advisor who can help tailor your coverage while keeping your best interests in mind. Whether you're shopping for small business insurance or a specialised commercial cover, knowing how broker compensation works is a key part of making informed insurance decisions. Be sure to ask brokers about their commission structure and any applicable fees before entering into an agreement.