How We Are Paid For Our Services
We believe that insurance buyers should know how agents are paid. We strongly endorse the disclosure of fees and commissions paid to agents and brokers in the sales and service of insurance products.
As Independent Insurance Agents, we represent the insurance buyer. Because we are independent, we are licensed with a variety of major, reputable insurance companies. Having multiple insurer relationships enables us to provide a wide selection of policies and customized protection to fulfill our customers’ diverse needs.
Each insurance company pays commission to their licensed independent agents for the sale of their insurance policies. These payments are made to cover our fixed costs and the costs of selling and servicing our customers’ policies throughout the year. The commission amounts vary by policy type and, in some instances, by insurance company.
Taxes, Filing Fees, and Assessments
No commissions or payments are made to agents for state taxes, filing fees or assessments. Examples of such fees include the California Insurance Guarantee Association on workers’ compensation policies and taxes and filing fees charged by some specialty lines insurers on ‘high risk’ property and liability policies.
No commissions or payments are made to agents for inspection fees. Inspection fees are charged to cover an insurance company’s costs in conducting on-site inspections of properties and insurance risks. Although an agent may bill and collect inspection fees, these payments are transferred and paid in full to the insurance companies.
Contingency Fees (also known as ‘Profit Sharing’)
Some insurance companies also pay agents contingency fees over and above commissions. Contingency fees, by definition, are not guaranteed. They are evaluated annually based on the insurance company’s loss experience for that year. When insurers have a profitable year with less than the expected amount of property damage and liability losses, they may reward agents and brokers for superlative performance. Conversely, in a year with severe winter weather or a hurricane, when insurance company losses exceed expectations, contingency fees would be eliminated.
Insurance companies that pay contingency fees each have their own criteria for what merits a reward. These might include agents exceeding new business targets, delivering quality service that retains clients or maintaining an aggregate profitable book of business.