Art. 13 · Where the premium goes · 3 min read
Broker commissions
This is not an accusation. Broker commission is a standard structure, and most businesses have never had it explained to them.
When you pay a premium, the money does not all go to the insurer. A share of it comes back to the broker as commission, deducted at source. You never see an invoice for it, because there isn't one. It is inside the price.
This is a perfectly reasonable way to pay for distribution. Someone has to explain the market to you, place the risk, chase the paperwork and fight your corner at claim time, and that work has to be funded.
But look at the shape of it. Commission is a percentage of premium. The person advising you on how much cover to buy is paid more when you buy more, and paid less when you self-fund a layer of risk. Nobody has to behave badly for that to influence outcomes at the margin.
There is a straightforward remedy, and it is not to distrust your broker. It is to ask.
In the UK, a commercial customer is entitled to ask a broker what they are being paid on the account, and the broker has to tell them. That covers commission from insurers, any fee charged to you, and arrangements where the broker earns more if a book of business performs well.
Knowing the number changes ordinary conversations. If you are considering raising an excess and saving £4,000 of premium, it is useful to know that the suggestion also costs your adviser £600. Not because it makes them wrong, but because you can then discuss it openly rather than wondering.
Use it
- Ask in writing, once a year. "Please confirm your total remuneration on our account, including commission, fees and any profit-share." It is a normal request.
- Ask about every insurer, not just the incumbent. Commission rates differ between insurers, which is worth knowing when a particular one keeps being recommended.
- Consider a fee for big accounts. If your premiums run to six figures, the maths on a fixed fee is worth doing.