How are Colorado independent insurance brokers and agents compensated?
As an independent local Colorado insurance agency we often have some misconceptions on how we are compensated for the services we provide our clients. Many times the client assumes their entire insurance premium is paid to us. While there are times we collect the insurance premiums for our clients, the premium is not our payment. We are not actually paid directly by our clients. Our clients purchase the product (insurance policies) through us. The premium is paid to the insurance company either directly by our insureds or by us. The insurance companies then pay us a commission on the insurance premiums. Those commissions can vary but typically 8-15% of the insurance premiums (not including the taxes and fees – we are not paid commissions on these items) are paid to our agency. These commissions are how we run our business. These are used primarily to pay our employees but they also are used just like a regular business to cover typical office based expenses.
Due to this arrangement a W-9 is not typically required. There are some insurance agencies that operate off of fees instead of commissions. In these cases the the W-9 would likely be required. Typically in the insurance business companies that pay insurance brokerages fees have substantially larger insurance premiums. The premium threshold for this type of arrangement can start at $100,000 if not $250,000 of annual insurance premium not including the fees paid to the insurance brokerage.
Why is this important? Our stance is that understanding how we are paid is crucial information. If you are paying $5,000 in insurance premium this is can be a large expense for most small businesses. Understanding that that premium results in $400 up to $750 of gross revenue to our company helps alleviate some of the frustration that occurs with any business expense. We are not charging you the premium. The total premium is not our revenue. We are a truly independent insurance agent that operates off commissions and works on your behalf to provide affordable insurance that meets your potential liabilities and market rate.
Our local Colorado independent insurance agency has been operating in Colorado for over 20 years. We have hundreds of customers that call this wonderful place home. Please contact us or fill out our online quoting form to discuss insurance and your business today.
Thank you for your time.
The Orcutt Insurance Group Team