Insurance In Focus

How insurance brokers are paid

Brokers are paid by commission or fee, and the cost of advice must now be disclosed. Understand how broker payment works before you buy.

Insurance brokers are usually paid by the insurer, not by you. When you buy a policy through a broker, the insurer pays a commission out of your premium. Some brokers also charge you a fee, and the rules require them to tell you about both. Knowing how your broker earns means you can judge whether the advice is angled toward a product that pays them most.

Commission from the insurer

Most brokers earn a percentage of your premium, paid by the insurer once the policy is sold. The rate varies by product: motor and home commission tends to be modest, while some commercial and specialist lines pay more. The commission is built into the price you pay, so it is not a separate bill you see.

This model is legal and normal. The concern is incentive. A broker who earns more from one insurer’s products may steer you there even when a cheaper or better-fitting policy sits elsewhere.

Fees you pay directly

Some brokers charge a fee on top of commission. Common fee points:

  • A set arrangement fee when you take out a policy.
  • A renewal fee each year the policy continues.
  • A charge for mid-term changes such as adding a driver or property.
  • A cancellation fee if you end the policy early.

A fee-based broker may take a lower commission or none at all, which can reduce the incentive conflict. The key point is that you should see every charge in writing before you commit.

What the broker must tell you

Since the FCA’s commission-disclosure rules and the Consumer Duty, brokers must be clear about how they are paid. You are entitled to know:

  • Whether they receive commission and roughly how much.
  • Any fee they charge you directly.
  • Whether they are independent or tied to a panel of insurers.
  • If they are whole-of-market or limited to a set list of providers.

If a broker will not answer these questions plainly, treat it as a warning. Read how the Consumer Duty changes what firms owe you.

How to use this when you buy

Ask for the total cost, not just the premium. A broker who shows commission, fees, and the range of insurers they approached is demonstrating the transparency the rules expect. Compare the policy they recommend with one or two you find direct, and check the cover, not just the price.

If you think a broker gave advice that put their commission ahead of your needs, you can complain. Our guide to how to complain about an insurer or broker sets out the steps, and the Financial Ombudsman Service can review the outcome.

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