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A comprehensive, professional contract defining the services, compensation, and fiduciary duties between an insurance buyer and their broker.
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An Insurance Broker Service Agreement is the foundation of a transparent, secure partnership between your business and the professional managing your risk portfolio. You need this contract when hiring a broker to design, place, and manage your commercial insurance policies, transition from a standard transactional relationship to a dedicated advisory model, or manage complex risk portfolios. A great agreement goes far beyond standard boilerplate legalities; it clearly aligns your broker’s incentives with your financial interests, establishes clear performance standards, and ensures complete transparency around compensation—especially regarding contingent commissions from underwriters. By formalizing this relationship, you protect your enterprise from hidden fees, secure dedicated advocacy during claims disputes, and set clear expectations for annual renewals. It transforms your broker from a simple vendor into a trusted, accountable fiduciary who actively protects your bottom line.
A commission is a percentage of the policy premium paid directly to the broker by the insurance company for placing the business. A broker fee is a flat or hourly rate paid directly by you, the client, for specialized risk management services. A robust agreement clarifies whether the broker is compensated by fees, commissions, or a transparent combination of both.
By default under common law, brokers generally owe a standard duty of reasonable care, not a strict fiduciary duty. However, your service agreement can explicitly elevate their responsibility to a fiduciary standard, legally requiring them to prioritize your interests above their own compensation.
The agreement should specify that mid-year termination triggers a transition period where the broker must hand over all active files and market relationships. It must also outline whether earned commissions are prorated or if outstanding flat fees are refunded to your business.
Contingent commissions are year-end bonuses paid to brokers by insurers for reaching certain volume or profitability targets. Your agreement should mandate the full disclosure of these payments to ensure the broker is recommending policies based on your needs rather than their own bonus targets.
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