The Myth: “Don’t Worry — The Insurer Pays Us”
It sounds nice, doesn’t it? Your broker shrugs and says:
“You don’t pay me — the insurer does.”
But here’s how insurance commissions really work:
- You pay your insurance premium
- The Insurer collects it
- The insurer sends a 20–30% of the premium (as commission) straight back to your broker
So yes, you’re absolutely paying your broker. It’s just baked into the premium, hidden from view, and you’ll rarely see it itemised.
Why Insurance Commissions Matter to Your Business
Conflict of Interest
The higher your premium, the more your broker earns.
That’s not just a fun fact — it’s a potential conflict of interest. If your broker is paid based on premium size, are they really incentivised to find you the most cost-effective cover? That was a rhetorical question 🥹
Hidden Broker Costs
Insurance commissions are rarely disclosed upfront.
In most cases, they’re buried in policy documents or just never mentioned. That lack of transparency makes it hard to tell whether your broker is earning fairly or quietly raking in a big chunk of your spend.
You Could Be Overpaying
Commissions are often 20% to 30% of your total premium.
For a $10,000 policy, that’s up to $3,000 going to your broker — even if they’re doing little more than forwarding you the insurer’s renewal each year.
Insurance Commissions vs. Fee-for-Service
Let’s compare the traditional model to a more transparent, fee-based approach.
Traditional
(Commission-Based)
Premium
$10,000
Broker Earning
$2,500 (commission)
Fee-for-Service
Premium
$7,500
Broker Earning
$1,000 (transparent fee)
Under the fee-for-service insurance model, you pay less overall, and you know exactly what your broker is earning. Not only that but, under a fee-for-service model, the broker is incentivised to get you the best deal not simply pass on high renewals or upsell unnecessary cover.
So why don’t more brokers do it?
Because their income would drop — sometimes by more than 60%.
And let’s face it: most are too comfortable to change.
What Can You Do About It?
If you’re working with a broker, ask two simple questions:
- What commission will you earn on this policy?
- Roughly how many hours did you spend arranging it?
Why Luma Is Different
At Luma, we’re building a brokerage model that puts your business first:
- We disclose our commissions upfront, so there are no surprises
- We offer a fixed-fee alternative, often more affordable than traditional models
- We’re not here to quietly earn more when you pay more
That means you’re always in control of your insurance costs.
TL;DR: Know What You’re Paying For
Just because a broker says you’re not paying them it doesn’t mean it doesn’t cost you.
Insurance commissions are real, and they’re usually hidden.
Want transparency?
Luma will show you both the commission and the fixed-fee option — so you can choose what works best for your business.
Ready for Real Transparency in Your Business Insurance?