Insurers pay a percentage of the premium, sometimes referred to as a brokerage to the placing broker. Depending on the placement chain, this can be split between different parties. Percentages can range from 10%, all the way upto 50% and beyond (if scheme business for example). Recent legislation has put pressure on insurers to reduce commissions but we still see examples of high figures that are not justified by the work involved.

For mid market to corporate business, and amongst certain reputable brokers in the marketplace, it is common place to charge a fee instead of the broker earning commission. The main benefit of this is transparency but also that the broker is less likely to be motivated by which insurer pays the highest commission but instead works in the best interests of the client.

Brokers will often be additionally remunerated by insurers based on the performance (loss history) of their book. They can also generate income by committing to business plans with insurers and by taking on additional administration (such as producing documentation).

Administration Fees have become established in particuraly the SME market with fees ranging from £25-£100 being charged for new business, MTA’s and even cancellations. There is questions to be asked as to why some of these events call for a additional charge, when the broker is already being paid by way of commission.

Third party finance providers often give brokers the ability to flex their net rates up in order to generate income. Finance is often available direct through the insurer.

The insurance market has long been built on relationships and referrals. Over time this has led to bad practices by way of third parties, often deemed as introducers being paid for passing business to brokers. This presents a whole number of conflicts of interests whilst again inflating the premiums paid.