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Decoding Your Broker's Paycheck: How Hidden Commissions Inflate Your Premiums

By: Matt Armstsrong, CEO & Founder of iiB

Published: October 16, 2025

Estimated Read Time: 7 Minutes

As a CFO or C-level executive, you operate in a world of transparency and accountability. You demand clear ROI on every dollar spent and expect your strategic partners to operate with the same integrity. Yet, in one of the most significant areas of corporate expenditure—your insurance program—a deeply embedded system of opaque payments and conflicted incentives often goes unquestioned.

Most businesses assume their insurance broker works exclusively for them. The reality is far more complex. The remuneration model of traditional brokers is often a web of payments from the very insurers they are supposed to be negotiating against. This isn't just a theoretical conflict of interest; it has a direct, negative impact on your premiums, the quality of your coverage, and the advocacy you receive at claim time.

This guide gives you the tools to decode how your broker is really paid and empowers you to ask the critical questions needed to protect your bottom line.

Standard Commissions (Brokerage)

The broker receives a percentage of your premium (often 0%-35%) from the insurer. This creates a direct disincentive to negotiate the lowest possible price for you, as a higher premium results in higher earnings for the broker.

Beyond the Fee: The Many Ways Insurers Pay Brokers

While you may pay your broker a fee for their service, this is often just the tip of the iceberg. An analysis of industry documents, such as the Financial Services Guide (FSG) of major brokers, reveals a multitude of ways (10 plus ) money can flow from an insurer to a broker. These payments can reasonably be expected to influence the advice you receive.

Here are the revenue streams you need to be aware of:

Proprietary Policy Wordings & Platforms

Large brokers often use their own unique policy wordings or platforms, charging insurers commissions or licensing fees for their use. This creates a powerful incentive to recommend their in-house products, limiting market access and impartial advice, regardless of whether another option offers better terms or value.

Consulting & Data Analytics Fees

Brokers receive separate, often lucrative, payments from insurers for consulting services. This incentivises the broker to place your business with the same insurers who are paying them for these contracts, compromising impartiality.

Payments to Associated Companies

Brokerage firms are often part of larger groups that include underwriting agencies or reinsurance brokers. This creates a clear financial incentive to place your policy with an insurer that uses their own group's services, rather than seeking the best option for you in the open market.

Premium Funding Commissions

When a broker arranges premium funding, they are frequently paid a commission by the funder. This can influence their recommendation towards the funder that pays them the highest commission, not the one offering you the most favourable terms.

Binder & Facility Fees

Brokers are paid by insurers to manage "binding authorities" or facilities, which can include claims handling. This divides their loyalty. During a claim, it becomes unclear if they are acting for you or for the insurer who pays them to manage the process.

Interest on Client Premiums

Brokers earn and retain the interest generated on your premium while it sits in their trust account before being paid to the insurer. This can discourage the timely transfer of funds to the insurer.

Non-Monetary Benefits ("Soft Dollars")

Insurers provide brokers with a range of benefits like IT support, event sponsorships, and marketing assistance. These perks create a relationship of mutual benefit that can compromise a broker's impartiality and focus on client needs.

How Conflicted Advice Costs You Money

This system of insurer-paid incentives can lead directly to higher costs and weaker coverage for your business:

Inflated Premiums

A broker may recommend a policy that is not the most cost-effective, but the one that pays them the highest commission or benefits a related company.

Coverage Gaps

The best policy wording for your specific risk profile might come from an insurer that doesn't participate in these arrangements or use the broker's proprietary platform. As a result, you may never be shown the best option, leaving you exposed.

Compromised Claims Advocacy

A broker receiving payments from an insurer for claims handling or other services faces a potential significant conflict when it comes time to fight for your claim against that same insurer. Their advocacy can be weakened by their desire to maintain a profitable relationship.

The Critical Questions to Ask Your Broker

As a C-level executive, you have the right to demand total transparency. It is your fiduciary duty to understand these potential conflicts. Here are the questions you may wish to ask your current broker:

Beyond the fee we pay you, do you or any of your associated companies receive any other form of payment from the insurers you are recommending for our program?
Can you provide a complete list of all remuneration streams and the dollar value you or any associated or related company receive, including commissions (brokerage), reinsurance commission, policy fees, underwriting fees, consulting fees, profit shares, volume bonuses, and payments for managing binders or facilities?
Are you recommending a policy that uses your own proprietary wording or placement platform? If so, can you show me how it compares to standard policies in the open marke
Do you have any associated underwriting agencies, insurers or reinsurers, and if so, will any of our policies be placed with these facilities?
When you handle our claims, are you ever acting on behalf of the insurer, and if so, how are you remunerated for that service?
What non-monetary benefits, such as tech support or marketing assistance, do you receive from the insurers on our program?

A transparent partner will answer these questions clearly without qualification or hesitation. Any reluctance to do so may be a major red flag.

The Solution: A Truly Unconflicted Model

The only way to guarantee that your broker is acting solely in your best interest is to eliminate every conflict. As a matter of principle, conflicts involving monetary reward cannot be successfully managed by disclosure alone; they must be avoided entirely. That is why iiB was founded.

We accept no payments from insurers. Ever. No commissions, no consulting fees, no profit shares, no back-end deals, no interest on holding up your payment to your Insurers. Our only remuneration is the fee paid by you, our client. This simple, powerful model ensures our incentives are 100% aligned with yours.

Our only goal is to reduce your Total Cost of Risk by securing the best possible coverage at the best possible price, and to act as your relentless advocate at claim time.

Don't settle for conflicted advice. Demand the transparency your business deserves.

About the Author

Matt Armstrong is the CEO and Founder of Independent Insurance Brokers (iiB). With over 15 years of experience in risk consulting and corporate advisory, he has seen firsthand how conflicted remuneration models can negatively impact clients. He founded iiB to create a structurally unconflicted brokerage that provides Australian businesses with the genuinely independent and transparent advice they deserve. Connect with him on LinkedIn -> www.linkedin.com/in/independentinsurancebrokers.

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