How Do Insurance Brokers Get Paid in New Zealand?

The question most people don't ask until it's too late

Somewhere between getting a quote and signing a policy, a lot of business owners wonder: is this broker working for me, or for the insurer? And if they're getting paid by the insurer, what does that mean for the advice I'm getting?

Those are exactly the right questions. The honest answer is that most brokers in New Zealand are paid by commission, and that's not inherently a problem. But you should understand how it works, what else you might be charged, and what you're entitled to ask.

The main way brokers get paid: commission

When you take out an insurance policy through a broker, the insurer pays the broker a commission. It's calculated as a percentage of your premium and it's built into the premium itself, not charged to you separately on top.

This is the standard model across most of the NZ insurance market. It's how it's worked for decades, and it's not unique to New Zealand. The insurer builds the commission into their pricing, the broker receives it when the policy is placed, and you pay one premium that covers both.

What that means in practice: you're not writing a separate cheque to your broker. But you're also not getting broker advice for free. The commission is the mechanism through which the broker is compensated for the work of finding, placing, and managing your policy.

Does that create a conflict of interest?

It can, in theory. A broker paid by commission has a financial incentive to place your business somewhere, and potentially to place it with the insurer paying the highest commission.

This is exactly why New Zealand's financial advice regulations require brokers to disclose commissions and any other incentives that could materially influence their advice. That obligation sits under the Financial Markets Conduct Act, through the licensing regime that came into full effect in March 2021. The Financial Markets Authority oversees it.

In plain terms: your broker is legally required to tell you about their remuneration. If they haven't, ask. Any reputable broker will answer without hesitation.

At Gerrards, we access more than 30 insurers when we're looking for the right fit for a client. The reason we do that isn't altruistic, it's because placing clients with the right insurer at the right price is what keeps them coming back. Commission structures don't change that logic.

Policy fees and admin fees

Commission isn't always the whole story. Some brokers charge a policy fee or administration fee on top of the premium. This is separate from the insurer's commission and goes directly to the brokerage.

These fees typically cover things like the time involved in setting up a new policy, mid-term adjustments, renewals, or managing more complex accounts. They vary between brokers and aren't universal, some brokers don't charge them at all, others apply them selectively.

If your broker charges a fee, it should be disclosed to you clearly before you commit. That's not just good practice, it's a regulatory expectation. If you're not sure whether you're being charged a fee, ask before the policy is bound.

Fee-for-service: the alternative model

For larger or more complex accounts, some brokers move away from commission entirely and work on a fee-for-service basis instead. The client pays an agreed fee for the broker's advice and placement work, and the broker either rebates any commission received from the insurer or negotiates a net-of-commission premium.

This model is more common in corporate or specialist insurance, think large commercial property portfolios, complex liability programmes, or businesses with significant insurance spend. It's less common for small-to-medium business insurance.

The advantage of fee-for-service is transparency: you know exactly what you're paying for the advice, separate from the cost of the insurance itself. Whether it's the right model for your situation depends on the complexity of your needs and the scale of your programme.

Does using a broker cost more than going direct?

This is the real question behind most searches on this topic. And the honest answer is: not necessarily, and often no.

Here's why. When you go direct to an insurer, you're still paying a premium that includes the insurer's own distribution costs, their call centres, their marketing, their online platforms. The commission a broker receives is often offset by the fact that brokers bring volume to insurers, which can translate to better pricing.

Beyond the premium itself, there's the question of what you're actually getting. A direct insurer can only offer you their own products. A broker with access to a wide panel of insurers can compare the market and find the policy that actually fits your situation, not just the one that's available.

And at claim time, the difference is stark. A direct insurer's claims team works for the insurer. Your broker works for you. That's not a small distinction when you're trying to get a claim paid.

What we see at Gerrards is that clients who come to us from direct insurers often have gaps in their cover they weren't aware of. Sometimes they're also overpaying for what they have. An annual policy review, which is part of what a broker does, catches both.

What you're entitled to ask your broker

NZ law gives you the right to understand how your broker is remunerated. You don't have to take it on faith. Before or when your broker provides advice, they should disclose:

• Whether they receive commission, and in general terms how it's calculated
• Any other incentives or benefits they receive that could influence their advice
• Whether they charge any fees directly to you

If you want to understand the specifics, the actual commission rate on your policy, for example, ask. A broker who's uncomfortable answering that question is worth being cautious about.

At Gerrards, we're straightforward about how we're paid. We receive commission from insurers on the policies we place, and we'll tell you that clearly. Our job is to find you the right cover at the right price, and to be in your corner when something goes wrong. That's what justifies the commission.

The bigger picture

Broker remuneration is worth understanding, but it's not the main thing to focus on when you're deciding whether to use a broker. The more important questions are: does this broker have genuine access to the market? Do they understand my industry and my risks? And will they actually fight for me if I need to make a claim?

Commission is just the mechanism. The value, or lack of it, comes from what the broker does with the relationship.

If you're a business owner weighing up whether a broker is right for your situation, the best thing you can do is have a conversation. Ask about remuneration upfront. Ask how many insurers they work with. Ask what happens when a claim gets disputed.

The answers will tell you a lot.

---

This is general information about how insurance brokers are remunerated in New Zealand. It's not personalised financial advice. If you'd like to understand how Gerrards is paid, or whether a broker arrangement makes sense for your business, get in touch, we're available 8am to 7pm, seven days a week.