Insurance Broker Fees

Insurance broker fees can account for a decent chunk of your insurance budget. Insurance brokers charge insurance carriers for their services, and carriers build that commission into the premiums.

Continue reading to learn about the different types of brokers and their fees. If you want to avoid broker fees, the best way is to compare quotes online yourself using a quote comparison tool. You can use our free quote comparison tool to get started.

Types of Insurance Brokers

To understand insurance broker fees, you need to understand the difference between the types of insurance agents. There are usually two types of agents, a captive agent and an independent agent, also known as a broker. Take a look at the two types below to learn about an independent agent vs. captive agent.

• Captive Agent: A 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.

Learn more: What is an insurance premium? 

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.

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Insured Parties and Broker Fees

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.

Read More: Five Insurance Fees To Watch Out For

The Final Word on Insurance Broker Fees

Insurance broker fees can be pricey, raising the overall cost of your insurance policy. If paying broker fees for insurance policies isn’t in your budget, then you should buy from the company directly.

If you aren’t sure what insurance company you want to choose, use our free quote comparison tool. It will help you find the best rates and coverages for your needs while avoiding fees from brokers.

Read More: What is an insurance quote?