It’s one of the most common questions people have about using a broker, and one that too few brokers answer openly. Here’s how it works.
Commission
Most commercial insurance brokers are paid by commission. When a broker places a policy with an insurer, the insurer pays the broker a percentage of the premium as commission. This is built into the premium, so there’s no additional cost to you: you’d pay the same premium whether you bought direct or through a broker.
Commission rates vary by product and insurer, but typically range from 10% to 35% of the premium.
Fees
Some brokers charge a fee instead of, or in addition to, commission. This is more common for large or complex accounts where the broker does significant work on risk analysis, market negotiation, and programme design.
If a fee is charged, your broker must tell you in advance and explain what it covers. Many brokers (including Castlemead) will be transparent about whether they earn commission, a fee, or both.
Does This Create a Conflict of Interest?
It can, and this is why independence matters. A tied broker or one owned by an insurer may be incentivised to place business with a particular provider because the commission is higher. An independent broker like Castlemead has no such tie. We recommend the insurer and the policy we believe is the best fit for your business, regardless of commission rates.
Our Chartered status reinforces this. Chartered brokers are bound by a code of ethics that requires us to act in our clients’ best interests at all times.
What Do You Actually Get for the Commission?
This is worth unpacking, because the work a good broker does goes well beyond “finding a quote.”
When we place a commercial insurance programme, we:
- Assess your business risks across every relevant class of insurance
- Create a detailed market presentation tailored to your specific needs
- Approach 80+ insurers and shortlist the best-placed providers
- Review every policy wording in detail, line by line, clause by clause
- Explain what’s covered and what isn’t, in plain English
- Negotiate terms, excesses, and pricing on your behalf
- Manage mid-term changes as your business evolves
- Act as your advocate at claims, from first notification to final settlement
To give a practical example: when we review cyber insurance for a client, we compare wordings across 18 insurers covering areas like business interruption definitions, supply chain cover, terrorism exclusions, production machinery, intellectual property, AI-related gaps, and warranty requirements. That’s not a five-minute comparison: it’s detailed, technical work that directly protects the client at claim time.
Does Using a Broker Cost More Than Going Direct?
In most cases, no. The commission is built into the premium whether you use a broker or not. And because brokers access wider markets and negotiate on your behalf, they often secure better terms than you’d find going direct.
For mid-market businesses with complex risks, the value of a broker’s expertise, in risk assessment, policy wording, and claims advocacy, almost always outweighs any cost difference.
Castlemead’s Approach
We believe in transparency. We’re happy to explain how we’re paid on any account, and our Terms of Business set out our remuneration clearly. If you’d like to know more, just ask: it’s a reasonable question, and we’d rather answer it openly than leave you wondering.
Frequently Asked Questions
How do insurance brokers get paid?
Most commercial insurance brokers are paid by commission from the insurer, which is built into the premium. This means there is typically no additional cost to the client: you would pay the same premium whether you bought through a broker or directly from the insurer. Commission rates vary by product and insurer, typically ranging from 10% to 35% of the premium. Some brokers also charge a fee for complex work, which must be disclosed in advance. Castlemead is transparent about remuneration on every account.
Do insurance brokers charge a fee on top of commission?
Some do, particularly for large or complex accounts where the broker carries out significant work on risk analysis, market negotiation, and programme design. Under FCA rules, any fee must be disclosed to the client in advance and the broker must explain what the fee covers. At Castlemead, our Terms of Business set out clearly whether we earn commission, a fee, or both on any given account. See our full transparency statement in the article above.
Is it more expensive to use an insurance broker than buying direct?
Usually not. Broker commission is built into the premium whether or not a broker is involved, so there is no additional layer of cost. In many cases, using a broker is cheaper because brokers access wider markets (Castlemead searches 80+ insurers), negotiate on your behalf, and structure programmes more efficiently. Direct insurers set their own pricing without competitive pressure. For mid-market businesses, the savings from proper market negotiation and risk assessment typically outweigh any perceived saving from going direct.
Does broker commission create a conflict of interest?
It can, particularly if the broker is tied to specific insurers or owned by an insurance group, because they may be incentivised to recommend the provider paying the highest commission. This is why independence matters. An independent broker like Castlemead is not tied to any insurer and recommends cover based solely on the client’s needs. Chartered status from the Chartered Insurance Institute adds a further safeguard: Chartered brokers are bound by a code of ethics requiring them to act in clients’ best interests at all times.
What services are included in a broker’s commission?
A commercial insurance broker’s commission covers the full placement cycle: risk assessment across all relevant classes of insurance, a tailored market presentation, approaching multiple insurers (Castlemead accesses 80+), detailed policy wording review, terms negotiation, mid-term adjustments as your business changes, and claims advocacy from first notification to settlement. For specialist risks, this includes significant technical work, for example, Castlemead reviews cyber insurance wordings across 18 insurers, analysing business interruption definitions, warranty requirements, supply chain exposure, and more.
Is Castlemead transparent about how it gets paid?
Yes. Castlemead’s Terms of Business set out remuneration clearly on every account, and the firm is happy to explain whether it earns commission, a fee, or both. As a Chartered, FCA-authorised broker, Castlemead is required to disclose its remuneration and is bound by a code of ethics that puts clients’ interests first. If you want to know how your broker is paid, ask: it is a reasonable question and a good test of any broker’s integrity. Contact Castlemead if you have questions.
