How commercial insurance brokers get paid

Most commercial brokers are paid by the insurer, as a commission calculated as a percentage of the premium you pay. Some are paid a negotiated fee by the client, and many are paid both. On top of the base commission, insurers often pay brokers additional "contingent" or "supplemental" commissions tied to volume, growth or loss results. None of this is improper when disclosed, but the rules for what you must be told differ by state, and you usually have to ask.

The three basic pay models

Commission is built into the price. Whether you buy through an agent or directly, the insurer has to cover its distribution costs somewhere; the NAIC notes that buying direct may be less expensive because the company does not have to pay an agent's commission (NAIC, How to Choose an Insurance Agent). That is a point about price, not value, because an intermediary also does work that a direct insurer does not do for you (independent agent, broker, captive agent or direct?).

A hypothetical illustration

Say a business has a $100,000 annual premium. The percentages here are for arithmetic only and are not typical market rates.

• Commission model. At a 10% commission, $10,000 of the $100,000 goes to the broker and the insurer keeps $90,000. You pay $100,000.
• Fee model. The insurer quotes net of commission at $90,000, and you pay the broker a $12,000 fee. Your total is $102,000.
• Hybrid. The broker takes a 5% commission ($5,000) and a $6,000 fee for risk-management services. The insurer keeps $95,000, and your total is $106,000 because of the added services.

The right choice depends on the work being done, not on which looks cheaper on paper. A fee arrangement shows the cost of the service clearly; a commission arrangement spreads it into the premium and can reward the broker for placing more business with certain insurers.

Contingent and supplemental commissions

Beyond the base commission, insurers commonly pay brokers extra compensation. The terms vary:

• Contingent (profit-sharing) commissions are paid after the year ends, based on the volume of premium the broker placed with the insurer and often the loss ratio of that book.
• Supplemental commissions are additional percentages paid on policies, typically based on the broker's prior-period volume, growth or loss results.
• Other arrangements include overrides and bonuses, which the NAIC model also treats as insurer-side compensation.

These arrangements became a public issue in 2004, when the New York Attorney General sued Marsh, alleging bid-rigging and a conflict of interest caused by contingent commissions. Marsh settled on January 31, 2005 by agreeing to an $850 million fund for clients, to end contingent commissions and to disclose its compensation in detail (Canadian Underwriter, Jan. 31, 2005). The case put broker pay under regulatory scrutiny, and the disclosure rules below are part of the legacy.

Contingent and supplemental income is a regular line in broker financials today. Brown & Brown reported full-year 2025 commissions and fees of $5,763 million, of which $255 million was profit-sharing contingent commissions and $5,508 million was core commissions and fees, according to its fourth-quarter 2025 earnings release of January 26, 2026. By our arithmetic, contingent commissions were about 4.4% of that total. One firm's mix does not describe the industry, but the number shows these payments are material and reported on their own line.

What disclosure rules require

There is no single national rule for commercial accounts. State law governs the producer's compensation, and the rules differ in scope.

The NAIC model. Section 18 of the NAIC Producer Licensing Model Act (#218; see producer licensing for agents and brokers) says that when a producer is paid by the customer, the producer may not also accept compensation from an insurer or other third party for the placement unless it has obtained the customer's documented acknowledgment and disclosed the amount before purchase, or, if the amount is not yet known, the method for calculating it. The model defines insurer-side compensation broadly to include commissions, bonuses, overrides, contingent commissions, gifts and any other valuable consideration. Producers paid only by an insurer they represent must disclose that they will be paid by the insurer or that they represent it. The model excludes intermediaries such as managing general agents and wholesale brokers (NAIC Model #218). States adopt versions of it; New Mexico's statute tracks it, according to the NAIC's state chart.

New York. New York goes further. Its producer compensation disclosure regulation, 11 NYCRR Part 30, requires a producer, at or before the time of application, to tell the buyer the producer's role, whether the insurer or another third party pays the producer, that pay may vary with the insurer chosen, the volume of business or the profitability of policies, and that the buyer can ask about expected compensation. On request, the producer must provide a prominent writing disclosing the nature, amount and source of its compensation, including that of affiliates, compensation tied to alternative quotes and material ownership interests between the producer and the insurer (11 NYCRR § 30.3). Ask for it. See New York.

Fee rules in other states. The NAIC's state chart of producers' ability to charge fees and collect commissions (reviewed June 2026) shows how much states differ (NAIC chart PR-70):

• Illinois (215 ILCS 5/500-80) conditions a producer's right to compensation on a written disclosure before the policy is issued, and requires the insured's signature when compensation or a service fee exceeds 10% of premium.
• Arkansas (§ 23-66-310) lets a licensed property or casualty agent or broker charge a fee on top of premium if it is separately disclosed on the invoice and the fees plus all commissions do not exceed 20% of total gross premium.
• New Jersey (N.J.A.C. 11:17B-3.1) requires a separate signed written agreement before an insurance producer charges a client a fee, stating the amount, the service, that the fee is not part of the premium and whether a commission will also be received.
• Nevada (§ 685A.155) provides that, unless the parties agree otherwise, a surplus lines broker's fee plus other commissions and charges must not exceed 20% of the premium.
• Arizona's fee statute (§ 20-465) excludes producers transacting commercial insurance and surplus lines brokers.

Group health plans: a federal rule

If you are an employer with a group health plan, federal law adds a disclosure right. Under ERISA § 408(b)(2), as amended by the Consolidated Appropriations Act, 2021, a broker or consultant that reasonably expects $1,000 or more in direct or indirect compensation for brokerage or consulting services to a group health plan must give the plan's responsible fiduciary a written description of the services and of direct and indirect compensation, including transaction-based pay such as commissions (29 U.S.C. § 1108(b)(2)). That requirement applies to benefits, not property and casualty lines. See ERISA basics for small employers: what the law requires of your benefit plans.

Wholesale and surplus lines

Hard-to-place risks often pass from a retail broker to a wholesale broker or managing general agent. The commission is then divided, with the wholesale broker keeping a share for access and underwriting work. Surplus lines placements also carry state premium taxes and, in some states, stamping fees, which are not broker compensation but add to the bill (surplus lines taxes, stamping fees and diligent search). The NAIC model's disclosure section does not reach wholesalers and MGAs acting only as intermediaries, so ask your retail broker to itemize the premium, taxes, fees and commission. See wholesale brokers and surplus lines placement: how hard risks get insured.

Questions to ask your broker

1. Do you earn a commission, a fee or both on each of my policies? What are the amounts or percentages?
2. Do you or an affiliate receive contingent, supplemental or any other payment from insurers on my placement?
3. Does your pay differ among the insurers that quoted? Which quote would you have recommended if pay were equal?
4. If I pay a fee, are commissions credited against it?
5. Do you or a parent own an interest in any insurer, managing general agent or wholesaler that is quoting me? Ownership of brokers by larger groups is common now (private equity and the consolidation of insurance brokers).
6. Will you put the answers in writing?

How to weigh the answers is covered in how to choose a commercial insurance broker.

Key takeaways

• Brokers are paid by commission from the insurer, a client fee or both. Commission is part of your premium; fees are billed to you.
• Insurers often pay additional contingent or supplemental commissions. They are legal and common, and disclosure rules aim to make them visible.
• Disclosure rules are set by states: New York requires disclosure on request, other states regulate fees, and the NAIC model applies when a client pays the producer.
• Employers with group health plans have a federal right to broker compensation disclosure when expected pay is $1,000 or more.
• Ask in writing what your broker earns on your account and whether it varies by insurer.