Broker fees

anniesmike

We transact all our insurance business through a local brokerage which we have used for many years. Last year, they started charging a 'Policy Fee' of £5 for each policy arranged or renewed. I managed to haggle this down to 1 annual £5 fee for the renewal of all our policies. Does anyone know the prevalent practice here? I assume that brokers still get a commission from the insurance company.

dunstonh

General insurance was recently overhauled and many brokers stopped being brokers. For example, most IFAs are no longer insurance brokers. We can still give quotes covering 50-60 companies but we actually get that information from a revised tier who are now called brokers (but werent before). Yet most clients and the public still think of us as brokers.

What has happened, is that those companies that still operate a brokerage are finding they have increased costs due to regulation. They no longer can just send out the renewal docs, they have a whole extra load of paperwork now due to regulation of general insurance and someone has to pay for it.

An option is to move the insurance to an IFA that doesnt operate as a brokerage. IFAs do not get the renewal docs, they go straight from provider to you and that saves costs and time, so there is no reason for the IFA to charge. Down side is that as the IFA doesnt see the docs, they cant shop round each year for you. Although if you contact the IFA and tell the new amounts, they could do it then.

Whilst that is fine for most general insurances, that wont be the case for car insurance and often commercial insurance. Direct companies have almost killed off car insurance through the local advisers and many dont get involved with commercial due to lack of demand.

Another option is to switch all your agencies to another local "broker", if you can find one, who doesnt make that charge. £5 a year seems pointless. If you assume a 10% commission on the general insurance, you can measure this is a guide to what they are getting. If the commission is £100 a year then charging £5 and risk losing your business doesnt make good business sense. However, if the commission is £30 a year then that doesnt really cover the cost of the admin involved.

anniesmike

Many thanks - most informative