Commissions & Fees Explained
Why do you charge admin fees if you're already getting paid commission?
If I was in your shoes I’d be asking the same question, why do we need to charge admin fees if we’re already paid commission from the insurers?
In a nutshell, commission is a percentage of the premium and can move up or down, whereas administration fees are fixed and provide guaranteed revenue for us - remember we're not a massive insurance company, we're a local professional services business.
If we're arranging a smaller value policy of $100-200 before government charges, the commission might only be $10-$30 so in that case we will need to charge a higher admin fee.
But for larger policies we might choose not to charge an admin fee if the commission income is high enough.
The benefit of being a small business is that we can be flexible with this and be client focused in our renumeration rather than profit driven.
The good news is that using an insurance broker won't necessarily cost you more!
In a report prepared by Deloitte for the National Insurance Brokers Association (NIBA) they found Insurance Broking provides many economic benefits, including:
Encouraging greater competition in insurance, with the average NIBA broker offering products across 10 different insurers
Reducing underinsurance, with 45 per cent of new broker clients being underinsured prior to engaging a broker
Using their experience to provide advice and save clients’ and insurers’ time, regarding risk assessment, policy selection or claims.
And in more than half of the cases studied the clients paid the same or less as they were before using an insurance broker!
If you’re interested in more of the detail jump over here:
> The Economic Value of Insurance Broking