Can I Negotiate Insurance Broker Fees and Commissions?

Feb
28
Fri

Is It Possible to Negotiate Insurance Broker Fees?

Negotiating the fees you pay to your business insurance broker may be possible, and is largely dependent on the size of your company, as well as the specific internal incentive policies of your insurance provider.

Anytime that fees and especially commissions are involved in business transactions, the first question that often comes to mind for the customer or client is, ‘Can those commissions and fees be reduced?'

Given that insurance is a field in which commissions and fees make up most if not all of broker compensation packages, this is a question that comes up a lot.

In many ways, buyers are almost conditioned to have this response, given that so many industries use reduced commissions and fees as one of the primary incentives to induce a potential buyer into closing the sale. But is that how it works with insurance brokers, too? Can a buyer negotiate their way to lower broker compensation?

 

In What Situation Might a Company Negotiate Broker Fees?

While far, far less common of an occurrence in the world of insurance than it is in car sales, the answer is that it may be possible to negotiate for reduced fees and commissions with a broker.

The likelihood of that negotiation being successful, however, varies widely depending on a few key factors – specifically, the size of the buyer’s company, the type of fees and commissions in questions, and the policies of the provider with regard to matters of broker compensation.

  • Company Size: As with many factors involving insurance, whether or not your company is able to negotiate-down brokers fees is largely a function of the size of your company. If you have fewer than 100 employees, it will be nearly impossible to negotiate your broker fees as a general rule. While there may always be exceptions to any rule, this tends to be a fairly firm general guideline.

    • With more than 100 employees, it never hurts to ask for a fee reduction, though the likelihood of effectively negotiating for such a reduction goes up significantly as your employee pool size passes several hundred and approaches 1,000.

  • Types of Fees and Commissions: Any attempt to negotiate a reduction in fees or commissions must first begin with a complete understanding of how all fees and commissions are being paid out to the broker. Many states have laws requiring the disclosure of how brokers earn their compensation, and even where such laws aren’t on the books, just about any broker with which you’re likely to want to work will be forthright with such information. As a result, gaining a thorough understanding of how your broker is compensated and incentivized can usually be accomplished simply by asking.

    • While brokers are more rarely going to be able to offer reductions in their base commission, they may have more flexibility to work with additional incentive compensation such as contingent or supplemental commissions.

  • Provider Policy: Even if your company is large enough to make negotiating-down commissions and fees feasible, and even if your broker has agreed in principle to such a fee reduction, the specific policies of your provider will most likely be the determining factor as to whether or not such a fee reduction can be implemented.

    • Similar to determining and having a thorough understanding of all the ways in which your broker will be compensated, figuring out whether such brokerage fee and commission negotiating is even possible is something that you’ll want to do at the outset of the process when vetting various brokers and providers and policies in the first place. Further, along the same lines as determining the ins-and-outs of your broker’s compensation package, if you neglected to inquire about these details prior acquiring your insurance coverage, it’s still never too late to ask!

 

two sets of hands folded on a table

 

Why Not Try to Negotiate Your Broker Fees?

Whether or not you and/or your company are ultimately successful at negotiating a lower rate for your broker’s commission and fees, there is little to no downside to inquiring about the possibility.

When evaluating potential new insurance brokers with whom you’re considering working, such a discussion can be a good way to broach the subject of the various ways and contingencies that your broker may be compensated, which is always good information to have available.

In situations where your company may have been working with the same broker for years, raising this issue may be a good way to come by a better understanding of your broker’s compensation structure if you’re not familiar with it already. Additionally, such a discussion may serve as inspiration and motivation to reassess your insurance situation in general, potentially leading to a desire to compare your broker’s and provider’s negotiation flexibility with that of other brokers and providers on the market.

In any case, if such an inquiry leads you to consider changing brokers or reevaluating and potentially refreshing your insurance policies, access Mployer Advisor's searchable database. You can find and contact brokers who meet all the criteria and qualifications most relevant to you and your business.

 


About Mployer Advisor

At Mployer Advisor, our focus is creating transparency in the insurance and insurance broker, consultant and advisor space to the advantage of the employer. Analytics is our core and we will bring to light new information, tools and resources to aid employers in making more cost-effective decisions. As a phase I, we are here to help employers find the right broker or consultant and the right insurance company for them. Giving choice and initial transparency is a first step in creating an employer centric insurance marketplace.

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