Independent Insurance Broker vs. Direct Writers (dealing with the Insurance Company directly)
When you deal directly with an insurance company through one of their agents, they can only offer you their products and prices. We believe that this may not be the best value for you the consumer.
An independent insurance broker represents a number of different insurance companies who offer different products and prices. This provides more options to allow you to choose the best value for your own insurance requirements. It also encourages competition in the marketplace. The broker’s role involves selling products on our behalf, assisting in providing data for underwriting, keeping records for policyholders and most importantly providing professional objective advice to you. The broker can also act as an intermediary should you ever have a claim.
Peace Hills Insurance supports the value the Independent Insurance Broker has to offer you. We feel that choice and professional advice is of the utmost importance for a well informed consumer. This is the reason we have chosen the independent insurance broker system as our sole method of distribution.
We compensate our brokers in a number of ways. We pay them a fixed percentage of the premium you pay. This varies depending on the type of insurance coverage involved. These fixed commissions paid by us are typically as follows:
In addition to the above fixed commissions, we recognize broker efforts through the potential for them to earn additional compensation which is often referred to as contingent commissions. These commissions are primarily based on the profitability of the broker’s total portfolio of business with us. The amount payable also takes into account the amount of business we write with that particular broker and the amount of business we retain. Not unlike any other business, this is our way of providing additional incentive to encourage profitable business. In 2009 the amount we paid for contingent commissions was approximately 1.7% of our total written premiums.
On average, the total broker compensation we pay is between 16% and 17% of our total written premiums.
In addition to commissions, some brokers earn service fees for performing additional services that we would normally do ourselves. These services include underwriting, data entry and policy issuance.
If you have any questions regarding the compensation your broker earns, we recommend you discuss it with them. They will be able to provide you with more detail regarding your own insurance.
Although not very common, we may offer loans or loan guarantees for brokers to acquire other brokerages. An example of this would be for succession planning reasons where one broker may purchase the interest of a retiring broker. In some cases these loan agreements may include premium commitments.
Investment in Brokerages
We do own a small amount of equity shares in one broker we deal with. There are no terms which would allow us any control or influence over the broker or the brokers’ activities. There are no premium commitments attached to this arrangement.
Ownership in Brokerages
Peace Hills has no direct ownership in any of the Independent Brokers we deal with.