Insurance brokers and insurance agents are both insurance specialists who deal in the distribution or selling of insurance policies. But how do independent insurance agents get paid? How do brokers get paid? Brokers and agents sell all different kinds of insurance, but the difference between them is that where brokers work on behalf of the client, the agent works on behalf of the brokerage or agency (in the United States.) There are benefits to both, and both have intricate knowledge in insurance enough to lend the policyholder advice where they need it.
AssurUni is considered to be one of Canada’s fastest growing, independent hubs for insurance. Our team is stacked with some of the most knowledgeable insurance experts in the industry and we are more than happy to have a chat with you and discuss opportunities within our team. First, let’s explore the topic of insurance brokers and how they get paid in this article.
Insurance Brokers & “Commissions”
The first and foremost way that an insurance broker is paid is through the commissions and fees that they earn on policies sold. Commissions are represented as a percentage of the total annual premium of that policy and, if you recall, a “premium” is the amount of money that an entity or individual pays for their insurance policy. The premium is used as income for the insurance company, but it also represents a liability – i.e., it can later be used to payout for any covered claims made against the policy.
Insurance brokers and agents may earn a lump sump percentage of the first-year premium of a policy that they are responsible for selling, and then may later earn an ongoing annual residual income payment through the lifetime of the policy. Ultimately, it all depends on the insurer, provincial regulations, and prior agreements.
Some other ways insurance brokers and agents may get paid includes:
Consulting and Advisory Fees
Depending on the individual broker or agent, consultative or advisory fees may be charged. As an example, some brokers may charge fees for initiating changes to a policy, or even to help file claims. Any additional fees charged beyond their commission payments may be regulated by the province they operate in, and the fees must be agreed upon by the broker and the client.
Brokerage Incentives
In some cases, brokerages (or agencies, in the USA) may incentivize their brokers or agents who have a high-performance record. Often, this compensation is delivered based on their past performance, and used to motivate continued behaviours in order to generate revenue.
That being said, this method of payment is extremely rare and often frowned upon for brokers, given the fact that it largely goes against what brokers do. Since brokers, unlike agents, do not represent a single insurance company, they behave without bias when selling insurance. Agents, who represent a single company, may be paid via bonuses or increased commissions for selling insurance in the best interest of the insurance company.
Which is Cheaper: Insurance Brokers vs Insurance Agents
From the policyholder’s perspective, purchasing insurance can be an extremely overwhelming process, whether they’re looking for home, auto, life, or a business policy to cover a new entity. There are dozens of companies and brokerages that they can choose from, and it can all get very complicated, very fast.
And then, of course, there’s the matter of price. If the policyholder is choosing to purchase insurance from an agent or broker rather than the company directly, then they might be wondering which option is cheaper. Price is everything, after all.
Well, it all depends. What is the policyholder looking for? The biggest benefit of an insurance broker is choice, which can make all the difference in the world when it comes to price. Being able to choose the cheapest plan or the plan that best fits the policyholder’s insurance needs can be a huge aid. The advantage of an insurance agent, or a direct representative of the brokerage, is quick coverage, as well as expertise on the company-specific products that brokerage provides. Both an insurance broker and insurance agent will be able to provide you curated advice which, in the long run, can save you money.
It goes both ways. Ultimately, working with a broker or an agent can provide the policyholder with insights they may not otherwise have had, and can help them save on their policies where purchasing directly from a provider may not grant the same savings opportunities.
AssurUni is Canada’s Fast-Growing Home for Insurance Brokers
AssurUni is one of Canada’s fastest growing homes for independent insurance brokers. We offer markets, support, tools, and freedom for entrepreneurial-minded insurance experts, or even newcomers to the industry, who want the above-and-beyond experience to begin investing in their own career in insurance. The insurance industry is stable and rich with opportunities, and AssurUni is the hub through which you can support that journey!
Since our inception in 2018, AssurUni has been committed to supporting both new and experienced damage insurance brokers by helping them build their client portfolios and achieve new objectives. We have a long withstanding track record of mentoring and training various insurance broker partners since our beginning, and we’re now expanding our offerings to aspiring entrepreneurs outside the industry. Click the button below and let’s talk today!