Summary: Insurance brokers in Australia are paid by commission from the insurer, a broker fee paid by the client, or a combination of the two. Every broker must hold or be authorised under an AFSL and should tell you how they are paid and what it costs, and you can ask for the dollar amount in writing.
How broker fees and commissions work
Insurance brokers in Australia are paid through commission, broker fees, or a combination of both. Understanding how these payment arrangements work can help you make an informed choice when selecting a broker.
Here’s where the money comes from, what you should be told, and what to ask your broker. Insurance brokers in Australia get paid in one of three ways:
- Commission from the insurer, built into your premium
- A broker fee you pay directly
- A combination of both
Want to understand your insurance options and how broker fees and commissions apply? Talk to our team at Barrack Broking for straightforward advice tailored to your business.
The Three Ways Insurance Brokers Can Get Paid
Commission Paid by the Insurer
The insurer pays the broker a commission for arranging and servicing the policy.
This is usually calculated as a percentage of the policy’s base premium. The rate can vary depending on the insurer, the type of cover and the services provided. Commission rates can differ significantly between insurers and classes of insurance.
Broker Fee Paid by the Client
The broker charges the client a fee directly for services such as assessing risks, providing advice, arranging cover and assisting with claims.
Depending on the arrangement, the broker may receive no commission from the insurer or may rebate some or all of any commission received. The fee appears as a separate line item on the client’s invoice, making the cost of the broker’s services more transparent.
Commission Plus Fee
Some brokers receive a reduced commission from the insurer and charge the client an additional service fee. The fee may cover work that is not adequately reflected in the commission, such as complex risk analysis, negotiations with insurers, policy administration or claims support.
What Your Broker Must Tell You About How They Are Paid
Every Australian insurance broker must hold an Australian Financial Services Licence (AFSL), or be authorised to provide financial services on behalf of an AFSL holder. Your broker should be transparent about how they are paid and any costs associated with arranging your insurance. Depending on the broker and policy, this may include commission, broker fees, or a combination of both.
When arranging insurance, your broker should provide clear information about:
- How they are paid
- Any fees or commissions that may apply
- Who pays those fees or commissions
- Any other relevant costs or charges
- What you can expect to pay for their services
Why How Insurance Brokers Get Paid Matters to Your Business
At Barrack Broking, our commitment since founding has been to deliver a level of transparency unmatched by our peers here. That’s why we ensure an experienced Director oversees each client matter. Understanding how your broker is paid can help you ask questions and make sure the cover recommended is appropriate for your business.
Potential conflicts
If a broker’s commission is linked to the cost of your insurance, they may receive more when the premium is higher.
Advice aligned with your interests
With a fee-for-service model, you pay the broker directly for their advice and work. This can make it easier to understand what you’re paying for and how the broker is remunerated.
Transparent value
A broker who cannot tell you what they earn from your account should not have your account. Knowing how your broker is paid helps you understand what you’re paying for and compare brokers based on their expertise, service and overall value.
Questions to Ask Your Insurance Broker
Keep these key questions in mind when choosing an insurance broker, including:
- How much will you earn from arranging my insurance?
- Will you receive a commission, charge a fee, or both?
- If I pay a broker fee, is any commission rebated or offset?
- Would your remuneration change if I chose a different insurer?
- Can you provide details of your remuneration in writing?
Barrack provides insurance broking services Australia-wide, and we answer these questions upfront so you understand how we’re paid before we place your cover.
Reach out to us at Barrack Broking today to further clarify.
Frequently Asked Questions
How much does an insurance broker make?
What a broker earns from your account depends on their commission rate and your premium size. Contact us today, and we can take you through our Financial Services Guide (FSG), and you can ask for the dollar amount.
What is an insurance broker?
A licensed adviser who acts for you, not the insurer, to place and manage business insurance and handle claims. Brokers assess risk, compare insurers, negotiate terms, and advocate for you at claim time.
Is it cheaper to buy insurance direct than through a broker?
Not necessarily. Broker commission is often already built into the premium, and brokers access wholesale markets and wordings that direct buyers can’t.
How do you become an insurance broker in Australia?
Complete the required education, gain work experience, and be authorised under an AFSL. Industry bodies outline the career path and skills for this job.