How are intermediaries paid for their services ?

 

Generally, there are two primary mechanisms by which insurance intermediaries can be compensated for their services:  (please check national legislation in this respect).

a)       A fee system under which the client directly pays for the services provided;

b)       A commission system under which the intermediary is paid a percentage of the premium paid by the client for coverage based upon the intermediary's agreement with the carrier.

 

The remuneration of the intermediary being in principle commission-based with the possibility to agree fees, has been a major contributing factor to the successful and competitive deve-lopment of insurance markets all over the world (99% of insurance premiums world-wide are genera-ted in markets where there is choi-ce in the remuneration system).

 

Some intermediaries can also be remunerated by other means or by a combination of compensation systems. Clients know that inter-mediaries are paid for their services. What compensation sys-tem is the best choice should be decided by the parties on a case-by-case basis and in a transparent dialogue about the various possibilities and this in relation to the related services.  Issues to be considered in the choice are for example the fact that a commission payment is typically an “all in price” where a fee based compensation includes a factor of uncertainty about future costs.