Insurance Broker Fees Survey
ACI Insurance and Risk Management (IRM)
Salt Lake City International Airport will be purchasing a separate property insurance policy this year. We have historically shared a policy with Salt Lake City and we share a broker. The City’s RFP and contract for insurance brokerage
services did not anticipate the extra work of marketing and securing coverage under a separate policy. We would like to be fair with the brokers but are unsure where to start negotiating. Any insights you can share would be most
appreciated.
1.
Do you pay your insurance broker on a fixed basis or as a percentage of premium? Please indicate the amount (ballpark).
2.
Please share any insights regarding negotiation of broker fees for a new solicitation.
Airport/Agency
Cincinnati/Northern Kentucky
International Airport (CVG)
Respondent
Scott Gibbons
Vice President - Administration
[email protected]
Broker Fees
Broker is paid on fee
basis
Dallas-Fort Worth International
Christina Peterson
Risk Management Dept.
[email protected]
$85,000 fixed annual
fee
Comments
Broker fee is contemplated during the RFP process. CVG's approach: (1) Have broker obtain property insurance premium with commission
included; (2) Have the broker also obtain property insurance premium with commission excluded and a fee for placing the policy; (3) Based
upon relationship and volume of work with airport, negotiate the broker's fee to be significantly lower than the commission included in the
initial quote.
During the solicitation, brokers submit proposed fee with their proposals based on the scope of work. Once the proposal is accepted, it is
non-negotiable unless the broker is requested to do work outside the initial scope. In RFP for insurance brokerage services, brokers are
requested to submit their proposed fees for each year of a three-year term. We do afford two additional one-year extensions so this is the
broker’s opportunity to submit proposed fees for the fourth and fifth year as well. Fee is not based on a percentage of premiums. Our
broker places all lines of our property/casualty insurance program, including a property policy with a loss limit of roughly $2B (total
insurable values over $5B); as well as a stop loss policy. The broker provides some risk management consultant work as well. (Their
services are not strictly insurance placement.)
Jacksonville
Roger Studenski
Risk Management Administrator
$25,000 fixed annual
fee
Jacksonville broke from City's property program in 2008 and airport's premium was reduced by 50%. They typically don't negotiate the
broker fees but the proposed fee is a rating factor when selecting a broker. Provided copy of their RFP for broker services.
Broker is paid on fee
basis
Same broker handles all of their commercial insurance. When placing property insurance, broker often goes to a wholesale broker who
also charges a percentage of commissions. In RFP, LCPA limits the amount of compensation paid to the wholesale broker to 5%.
$115,000
compensation rate
equal to 6% of
premium
$145,000/year fixed fee
for total insurance
program
Fee included in PEPIP.
$33,000/yr to market
liability insurance
Fixed amount
Massport compensates its broker with agreed upon value as part of RFP. Policy has $750M in limits, which includes TRIA and earth
movement. Contemplating an annual broker RFP that will result in one broker renewing all lines. Believes an overall reduced commission
could be realized. Massport has historically assigned brokers to lines of coverage the authority felt they were best suited for.
Lee County Port Authority (LCPA) Ellen Nichols
Southwest Florida International
Risk Manager
[email protected]
Massachusetts Port Authority
Frank Rivera
Director, Risk Management
[email protected]
Memphis-Shelby County Airport
Authority
Artz Forrest
Director of Finance/CPO
[email protected]
Metropolitan Airports
Bill Hoyt
Commission
Insurance Risk Manager
(Minneapolis)
[email protected]
Metropolitan Washington Airports Michael Natale
Authority (MWAA)
Risk Manager
[email protected]
Miami Dade Aviation Dept.
Sonia Bridges
Flat fee
Miami International
Chief, Risk Management & Support
Services
[email protected]
Portsmouth International Airport Mark Gardner
Fee included in policy
(NH)
General Counsel
premium
[email protected]
Phoenix-Mesa Gateway
Fred Kaplan
Chief Financial Officer
[email protected]
If insurance premium cannot be reduced by the commission amount, the commission is paid to the broker and the fixed broker fee is
reduced by this amount. In negotiating the fees, they looked at direct labor time and expenses to calculate the fee. Carries $800M in
property coverage.
For property insurance broker fee is included in Alliant's Public Entity Property Insurance Program (PEPIP). On benefits side, they pay a
commission for fully insured benefits and a flat consulting fee for self-funded benefits. Currently preparing an RFQ for the self-funded
benefits consulting.
They go out to bid every 4-6 years and split the program into property and casualty. One broker can win both, or just one piece. MWAA
expects a fixed price for items identified in the scope of work, such as the renewal process and then have optional hours to be expended at
their discretion for claims and loss control. Provided a copy of the RFP they did in 2011.
Our airport properties (MIA & GAA) are part of the County’s master property insurance program. Therefore, there is one broker for all
properties. We have been on Flat Fee basis for many years. So when there is a RFQ, brokers submit their proposal which is predominately
rated on their qualifications. Once we have chosen maybe the top 3 firms ranked highest in qualifications, then we open the price
proposal. The selected broker is then brought in for negotiations (so there is still an opportunity to lower the fee).
PSM does not negotiate broker fees and makes awards premised upon premium amounts. Broker’s fee is subsumed in the policy premium.
The percentage varies depending on the company providing the coverage. I understand the percentages can be anywhere between 5% to
15% of the premium (+/-).
Suggest soliciting new broker services through RFP process. Would force respondents to provide their fees and/or fee structure. Looking
at a significant expansion program. In the process of completing due diligence of their insurance across all lines. Reviewing and
benchmarking everything from provenance of asset ownership to named insureds and limits of liability.
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Insurance Broker Fees Survey
ACI Insurance and Risk Management (IRM)
Airport/Agency
Pittsburgh International Airport
Port of Oakland
Port of Portland
Port of Seattle
San Diego County Regional
San Francisco International (SFO)
Tucson Airport Authority
Wayne County Airport Authority
Greater Detroit Area
Arthur Gallagher
Risk Mgmt. Services
Respondent
Stephen Robinson
Controller
[email protected]
Betsy Ross
Port Risk Manager
[email protected]
Broker Fees
Comments
$150,000 commissions Fixed fee annually, net of commissions received from policies placed. One broker for all insurance policies. Replacement cost coverage.
$807M property coverage and $100K deductible
Currently paying
broker commission
based on approx. 12%
of premium.
They will likely change to a fee with next RFP. The brokers should disclose their compensation in the RFP. Could ask them to quote based
on a flat fee or a commission or offer quotes on both methods. The competition should keep their remuneration low. The RFP should also
ask them to describe specifically who will be on the broker team and their activities. The broker may charge a higher rate for a seasoned
broker but the seasoned broker may do the job in less time than a cheaper broker and get better results on the premium (the impact on
premium costs can be significant). Another consideration is the broker's experience with handling airport claims as the broker may also
have a significant impact on claim results.
Donna Tyner
$105,000 on a fixed fee Required to go through RFP for contracts greater than $5,000. Proposals submitted with bid amounts. Price is a factor in selecting broker
Risk Analyst III
basis per year for ins.
but not necessarily a major consideration.
[email protected] brokerage and risk
management
Suggestions: (1) Have broker justify the basis for their additional fees request (what percentage of total TIV on policy is the airport, how
Andrea Marzette
consulting
many hours of additional work did they factor in, etc.). (2) Compare respective TIV, coverage and cost to airports who place their property
Risk Manager
separately from GL and other lines. (3) Compare the going commission rate to what broker is charging. Would expect to negotiate a
[email protected]
sizeable reduction from standard commission based on economy of scale and broker's desire to retain the business.
m
Jeff Hollingsworth
Indicated he has some thoughts on the subject and will call Cole 3/15/12.
[email protected]
Cindy Steele
Flat fee for all lines
RFP allows broker to bid for one or both lines of coverage. Provided copy of RFP.
Risk Management
[email protected]
Mike Warren
Historically 10-20%
SFO brokers compensated on a percentage of premium basis for property insurance. The fees change from year to year based on market
SFO Risk and Audit Manager
conditions and the City and County of San Francisco loss history. Premium and corresponding commission are allocated from the City and
[email protected]
County of San Francisco based on total insured value, adjusted for individual enterprise unit's losses. Most of SFO's infrastructure is highly
protected risk, exclusive of seismic risk. Total insured value for SFO is approx. $4.5B. Per occurrence limit is $1B. Based on 2011 analysis,
current PML (Probable Maximum Loss) for airport is approx. $300M.
Karen Rogers
Fixed amount. Prefers No negotiation of fee. Fee is set in the RFP by approximately the percentage of premium.
Insurance & Risk Coordinator
not to indicate amount.
[email protected]
Leigh Stepaniak
$203,750 fee for all
Broker fee includes GL, property, auto, workers' comp, public officials, incl. cyber risk, police professional and crime. Carrying $1B in
Director, Risk Management
lines
property coverage. Suggestion: Can maybe gauge fee by looking at what a commission would be. Commission is usually higher than fee,
[email protected]
so you can use your judgment on discounting it off a commission basis.
Rich Terlecki
Arthur Gallagher receives the following broker fees:
Area Senior Vice President
Greater Orlando Aviation Authority - $236,000 for all lines
[email protected]
Tampa - $75,000 for property only
Jacksonville - $55,000 for property only
Cincinnati - $40,000 property only
Commission is better for everyone as long as broker guarantees 100% transparency and contract states that no other revenue can be
realized by the broker other than what was originally disclosed. A good starting point is 10% of premium, whether it be commission or
fee. Believes SLCDA could shave $250,000 of premiums.
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