Insurance broker fees can be calculated and charged in several ways, depending on the agreement between the broker and the client.
Insurance broker charges may be commission-based, fee-based or a combination of both. You may also charge additional fees for specific services such as policy renewals, policy changes, or claims assistance. Whichever way, you structure your fees, you will already be aware of compliance and the importance of disclosing the fees upfront so that your clients understand the costs associated with your services. This transparency can help build trust and long-term relationships with clients.
How do you set your insurance broker fees?
Historically, some insurance brokers may have simply charged a commission fee of 10% of the premium sold, and at present with insurance premiums on the rise this method would result in a small increase. But would it be better for charges to be based on accurate data, so that you know that what you charge is a true reflection of the value of the work that you do?
Do your fees reflect the value you add?
In the current climate all costs are rising, and brokers should follow the lead of other professional services and put up their fees.
But rather than just charging an arbitrary sum, consider these factors to make sure you are truly valuing the service you offer.
- Determine the scope of services:
Decide on the level of service you will provide to clients, including the type of policies you will broker, the level of advice you will offer, and the extent of your involvement in policy management and claims handling.
- Risk Management?
When considering the scope of services, be clear on whether you are simply offering product options or taking an active part in supporting your clients to manage their risk. If it is the latter, put a value on your risk management consulting and the benefits to your clients of being suitably insured.
- Assess the workload:
Once you’ve clearly defined your scope of services, assess the amount of work involved, including research, analysis, travelling and expenses, negotiations, and administration.
- Evaluate the market:
Research trends and costs that are specific to your industry in addition to what fees other insurance brokers in your area charge. But remember here your USP, and if your value/scope of service is different to your competitors then it will not be a like for like comparison and in that case, know what differentiates your service from the competition.
- Consider your experience and expertise (USP):
Your level of experience and expertise can be a factor in determining your fees. If you have a strong track record and specialised knowledge in a particular area, value this and charge fees accordingly. Make sure that the unique selling points of your brokerage are clearly communicated to your customers/potential customers.
- Be transparent:
Communicate your fees to clients upfront and ensure that your clients understand the value of the services you provide. This can help build trust and establish long-term relationships with clients.
- Review and adjust fees regularly:
Regularly review your fee structure to ensure it remains competitive and continues to reflect the level of service you provide.
Ultimately, the goal of setting Insurance broker charges is to provide fair compensation for your services, while offering value to your clients, winning their business and managing their risk by ensuring they are suitably insured.
Alphatec’s time recording software, Timebox, can help Insurance brokers set fees that cover costs
Alphatec’s Timebox is an invaluable tool for the insurance broker and can ensure profitability. With the right data entered into Timebox, any insurance broker can see the REAL costs associated to every client, product, and insurer, and know which areas of the business are profitable or not. The software allows brokers to continually monitor the bottom-line profit, not just the top-line turnover.
Being able to drill down on the true costs can help you set the RIGHT Insurance broker charges for your services, based on real facts and figures not just a finger in the air.
In a highly competitive market, Timebox provides the insight to show you what your true costs are, allow you to set the appropriate insurance broker charges, but to also provide incentives or pitch your price and ensure that you win business without risking the overall profitability of the brokerage.
We look forward to helping you.