- How Insurance Brokers Get Paid
- What the Difference Means for You
- Disclosure Is Not Optional
- Commissions, Fees, and Conflicts of Interest
- Brokers vs Direct Insurance Platforms
- How ABS Insurance Brokers Handles Remuneration
- Questions to Ask Your Broker About Fees and Commissions
- FAQs
- The Bottom Line
When you buy insurance through a broker, asking how they get paid is completely reasonable. Understanding the difference between a broker fee and a commission helps you assess the advice you're receiving, compare your options with a clear head, and feel confident that the cover you end up with actually suits your needs — not someone else's margin.
This article explains both payment models, what each one means for you as a client, and the questions worth asking before you commit.
How Insurance Brokers Get Paid
Brokers earn money in one of two ways: a commission paid by the insurer, a fee paid by you, or sometimes a combination of both. Neither model is inherently better or worse, but they work differently — and knowing which one applies to your situation matters.
Commission-Based Brokers
When a broker places your policy with an insurer, that insurer typically pays the broker a percentage of your premium. This is called a commission, and it comes out of the premium you pay rather than appearing as a separate charge on your invoice.
Commission rates vary depending on the insurer, the type of policy, and the complexity of the placement. Some classes of insurance carry higher rates than others — liability policies, for example, are generally structured differently to a basic property policy.
Because the commission is embedded in the premium, many clients never see it as a line item. That doesn't mean it's hidden. Under Australian law, brokers are required to disclose their remuneration — including any commissions — before or at the time they provide personal advice. This disclosure appears in the Financial Services Guide (FSG) and, where applicable, the Statement of Advice (SOA) the broker provides.
Fee-Based Brokers
Some brokers charge a flat fee or an hourly rate instead of, or in addition to, any commission received. This is more common in complex commercial placements where structuring the right program involves considerably more work than a standard policy search.
A fee-based arrangement makes the broker's remuneration straightforward to see. You know exactly what you're paying for the advice and placement work, separate from the cost of the insurance itself.
In some cases, a broker will charge a fee and also receive a commission, then offset one against the other. Either way, the net result should be disclosed to you clearly.
What the Difference Means for You
The payment model alone doesn't determine whether a broker is acting in your interest. What matters more is whether they're genuinely independent in their recommendations and whether they're disclosing their remuneration fully.
That said, there are practical differences worth understanding.
With commission: There's no separate invoice from the broker. The cost is built into your premium, which can feel simpler — but it also means you'll need to ask about the commission rate if you want a full picture of the cost breakdown.
With a fee: You pay the broker directly, typically upfront or on invoice. This makes their earnings visible and separate from the insurer's pricing. Some clients prefer the clarity; others find it adds a step to the process.
With both: A broker might charge a service fee for ongoing account management or claims support while also receiving commission on policy placements. This is common in commercial broking, where the relationship involves more than placing a policy once a year.
Disclosure Is Not Optional
Australian financial services law requires brokers to tell you how they're remunerated. This isn't a courtesy — it's a legal obligation under the Corporations Act and the requirements that apply to Australian Financial Services Licence (AFSL) holders.
Before or when a broker provides personal advice, they must give you a Financial Services Guide. That document sets out who the broker is, what services they provide, and how they and their associates are paid. If personal advice follows, a Statement of Advice is also required, and that covers remuneration too.
If a broker can't or won't tell you how they're paid, that's a problem. One who discloses clearly and explains the reasoning behind their recommendations is one you can work with confidently.
Commissions, Fees, and Conflicts of Interest
The concern some people have with commission-based broking is that a broker might steer you toward a policy with a higher commission rather than the one that actually fits your needs. It's a fair question to raise.
In practice, reputable brokers manage this through their professional obligations and the oversight that comes with holding an AFSL. They are required to prioritise your interests and to act with care, skill, and diligence.
A simple way to test this: ask your broker directly why they've recommended this insurer and this policy. A good broker will walk you through the reasoning — coverage terms, exclusions, insurer financial strength, claims handling reputation. If the answer is vague or sidesteps the question, that tells you something.
Brokers vs Direct Insurance Platforms
When you buy directly from an insurer or through a comparison website, there's no broker fee or commission going to a third party. But there's also no advice, no tailored assessment of your risk, and no one in your corner when a claim gets complicated.
For straightforward personal lines, buying direct can work well. For commercial insurance, construction cover, or any situation where the risks are layered and specific, the value a broker provides typically outweighs the cost of their remuneration — whether that's a fee or a commission.
How ABS Insurance Brokers Handles Remuneration
ABS Insurance Brokers is an Australian-owned brokerage operating within the Steadfast Network. That network access means the team can approach a wide range of insurers to find cover that genuinely fits your situation, rather than being limited to a single provider's products.
When you contact ABS, a broker works through your specific needs with you directly. Remuneration is disclosed as required under Australian law, and the focus is on finding the right policy for your risk profile — not the easiest or most profitable placement.
Whether you're a builder, a construction business, or a commercial operator with complex insurance requirements, the process starts with a conversation. You can request a quote or speak with the team through ABS Insurance Brokers.
Questions to Ask Your Broker About Fees and Commissions
Before agreeing to any policy placement, these are worth raising:
- Are you receiving a commission on this policy, and if so, what is the rate?
- Are you charging a fee in addition to or instead of commission?
- If both apply, how are they disclosed and reconciled?
- Why have you recommended this insurer over others?
- What happens to your remuneration if I make a claim or change my policy mid-term?
A broker who welcomes these questions is one who's confident in their process. The answers should be clear, specific, and consistent with what appears in your FSG.
FAQs
What is the difference between a broker fee and a broker commission?
A commission is paid to the broker by the insurer as a percentage of your premium. A fee is a separate charge paid directly by you for the broker's services. Some brokers use one model, some use the other, and some use both.
Is it better to use a fee-based or commission-based broker?
Neither is automatically better. What matters is that the broker discloses their remuneration clearly, explains their recommendations on the merits of the cover, and prioritises your interests. Both models are lawful and common in Australia.
Do I have to pay a broker fee on top of my premium?
Not always. If your broker is commission-based, their payment comes from the insurer and is embedded in your premium. If they charge a fee, that will be invoiced separately. Your broker must tell you which arrangement applies before or when they provide advice.
Are insurance brokers in Australia required to disclose their commissions?
Yes. Under Australian financial services law, brokers holding an AFSL must disclose how they and their associates are remunerated. This appears in the Financial Services Guide they provide to you.
Can a broker receive both a fee and a commission?
Yes, and it's not uncommon in commercial broking. When both apply, the broker must disclose both amounts and explain how they interact. Some brokers offset the fee against the commission so you're not paying twice.
Does using a broker cost more than buying insurance directly?
Not necessarily. Brokers often have access to insurer markets and pricing that aren't available through direct channels. The commission or fee is part of the total cost, but the cover quality, policy terms, and claims support a broker provides can represent real value — particularly for complex commercial risks.
How do I know if my broker is acting in my interest?
Ask them to explain why they recommended a particular insurer and policy. Check that their remuneration is disclosed in writing. A broker who gives clear, specific answers — and whose recommendations hold up to scrutiny — is one you can rely on.
The Bottom Line
Understanding how your broker is paid isn't about distrust. It's about being an informed client. Whether your broker earns a commission, charges a fee, or uses a combination of both, what matters is that it's disclosed clearly and that the recommendation stands on its own merits.
If you're arranging insurance for a construction business or commercial operation and want to work with a broker who will explain the process plainly, the team at ABS Insurance Brokers is a straightforward place to start.
