How Do Insurance Brokers Get Paid?

Supporting and managing a business takes time and effort and also comes with risks. Insurance can help mitigate those risks.

Also, when you support and manage a business with employees, offering your employees a solid benefits platform is essential. Offering great benefits helps to attract and retain employees and keeps your workforce happy.

If one or both above situations describe your situation, it’s common knowledge that there are a wide range of policies available to support your business and your employees. With such a large selection, along with the diverse needs of each business and workforce, selecting policies can be a cumbersome and complicated process. Insurance brokers can support you in reviewing the many insurance policies available to you and selecting the right plans for your specific needs.

How Do Insurance Brokers Get Paid?

It is helpful for companies and individuals working with brokers to understand how they get paid. Having this knowledge means they can make the best decision on who to work with and forge a long-standing relationship built on understanding and trust.

As experts in their field, insurance brokers are equipped with valuable knowledge about the ins and outs of insurance policies they specialize in, including business insurance policies and employer-sponsored benefits. In exchange for their services and expertise, brokers receive commissions and broker fees.

Broker Commissions

Commissions are paid directly by the insurance company and are generally based on the annual premium paid by the insured. The insurance company includes the broker commissions in the cost of premiums paid by the insured. The compensation and commission received by the broker often varies between the insurance companies with which they work.

Broker Fees

Broker fees, on the other hand, are typically charged by the broker to the client to cover services provided by the broker. Broker fees are governed by state law, and where permissible, are required to be reasonable, clearly disclosed, and generally must be accepted by the client with signature validation.

Captive and Independent Insurance Agents vs. Insurance Brokers

An important distinction when it comes to purchasing insurance is the difference between captive and independent insurance agents and insurance brokers. Captive and independent agents represent the insurance company and get paid in commissions. Therefore, their interest lies with the company and not the client—they have a personal incentive to help the companies they represent secure more clients, and as such, direct clients toward certain insurance carriers or policies. The carriers and policies might not best align with the client’s best interest.

Insurance brokers represent their clients vs. insurance companies. Though they do get a commission from the insurance company, that commission only continues for as long as the client remains with and pays for the insurance policies they secure. It’s in the insurance broker's best interest to work for the client so the client remains satisfied and sticks with their policies. As previously mentioned, any broker fee charged to a client must be reasonable and clearly disclosed to the client, which minimizes or entirely eliminates any potential for financial, personal bias.

Benefits of Working with a Brokerage Firm

To get the coverage you need for your business or employees, it’s vital to understand your options. Insurance brokers add a lot of value in terms of the decision-making process from onset to finalization and beyond. Insurance brokers:

• Offer a few plan options and premium quotes for your review based on your needs.
• Help you understand the fine print and details of your plan options.
• Provide ongoing service to the account, including determining eligibility, billing issues, and claims support.
• Review your current plans to identify any insurance gaps to fill.
• Save you time and resources by doing the up-front research and weeding out for you.
• Support the implementation of the plan with the insurance provider.
• Help you maximize your coverage once secured.
• Assist with updates and the renewal process.

As experts, insurance brokers also remain current with market trends to ensure you’re getting all the information and insights needed to make the best and most competitive decision. Brokers can help you get the best policy for your needs vs. one that is just good enough. Also, insurance brokers remain up to date with local, state, and federal laws influencing insurance and employee benefits to help you remain compliant with current regulations. This helps to protect you against avoidable liability claims, debts, and fines.

Types of Insurance Policies Represented by Brokers

An insurance broker can specialize in a variety of insurance types or a single type of insurance. Though the primary focus of this post is regarding business insurance and employee benefits, brokers can also represent personal insurance policies. Insurance brokers are required to hold licenses for each type of insurance they represent.

Personal insurance policies a broker might offer include:

• Automobile insurance
• Dental Insurance
• Disability insurance
• Flood insurance
• Homeowner’s insurance
• Life insurance
• Medical Insurance
• Vision Insurance

Commercial or business insurance a broker might offer includes:

• Business interruption insurance
• Commercial auto insurance
• Employee benefits (see below)
• Errors and omissions insurance
• General liability insurance
• Property insurance
• Worker’s compensation insurance

The type of employee benefits a broker might help a business secure include:

• Dental insurance
• Disability insurance
• Life insurance
• Medical insurance
• Pet insurance
• Vision insurance

Tips for Finding an Insurance Broker for Your Business

If you’re an HR or Benefits Manager, working with an insurance broker can support you in selecting the most competitive benefits to meet the needs of your workforce while remaining compliant and protected. If you’re a business owner, senior leader, executive, or partner, you’ll avoid the hefty lifting by working with an insurance broker to save you money, time, and other resources you can direct elsewhere. For those representing a small or medium-sized business, an insurance broker serves as a trusted partner that can walk you through the insurance securitization process.

Regardless of your position, working with a reputable insurance broker means:

• Your interests and needs are priority.
• You don’t have to invest time going through insurance research and selection.
• You’ll receive competitive plan and rate options that align with your goals.
• You can rest assured you’re legally compliant.
• You’ll remain competitive in the job market.
• You’re forging a long-term relationship for your insurance and employee benefits needs.

To select an insurance broker for your business, look for the following qualities:

Accessibility: It’s essential that your broker be accessible when you need it. This means being available to answer questions or support challenges and being timely when returning emails and calls.

Honesty: Honesty and transparency are hallmarks of a lasting professional relationship. If you feel the broker you’re speaking with is trying to hide their fees or any details pertaining to insurance coverage from you, move on.

Expertise: It’s necessary to work with an insurance broker that has expertise in your area of interest.

For example, securing employee benefits requires a different type of expertise than seeking professional liability insurance does. Some insurance brokerage firms choose to specialize in one area of interest, whereas others offer expertise for a variety of insurance needs.

Finally, take the time you need when researching insurance brokers. You have options, so interview a few to determine which best aligns with your business.

Key Takeaways: How Do Insurance Brokers Get Paid?

• Selecting insurance policies can be a cumbersome and complicated process for businesses due to the many options available and the specific and diverse needs of each business.
• As experts in their field, insurance brokers are equipped with valuable knowledge about the ins and outs of insurance policies they specialize in, including business insurance policies and employer-sponsored benefits.
• In exchange for their services and expertise, brokers receive commissions and broker fees.
• Broker commissions are paid directly by the insurance company and are generally based on the annual premium paid by the insured.
• Broker fees are typically charged by the broker to the client to cover services provided by the broker.
• Broker fees are governed by state law, and where permissible, are required to be reasonable, clearly disclosed, and generally must be accepted by the client with signature validation.
• An important distinction in terms of purchasing insurance is the difference between captive and independent insurance agents and insurance brokers: captive and independent agents represent the insurance company and get paid in commissions, and Insurance brokers represent their clients vs. insurance companies.
• An insurance broker can specialize in a variety of insurance types or a single type of insurance and are required to hold licenses for each type of insurance they represent.
• As experts, insurance brokers remain current with market trends and with local, state, and federal laws influencing insurance and employee benefits to help you remain compliant with current regulations.
• When selecting an insurance broker, seek out a broker that has the expertise you need and offers honesty and accessibility.
• Take the time you need when researching insurance brokers, and interview a few to determine which best aligns with your business.

KBI Benefits Brokerage Firm for Your Insurance Needs

There are many insurance considerations for your business, and you have options for insurance brokers. At KBI, we appreciate how daunting purchasing employee benefits and business insurance can be for you and your business. Our team of experts can walk you through the process and ensure you choose the best plans to meet your business’ goals and meet legal obligations. Contact us today for more information.