A broker is not a price comparison service with a person attached. Here is the job as it is really done, who pays for it, what the law requires of it, and how to tell whether you are getting it.
The job, described plainly.
Most people can describe what a broker does when a policy is bought. Far fewer can describe what one does in the eleven months after that, which is where most of the value sits and where the difference between one broker and another shows up. This is the whole job, including the parts nobody sees, the parts a broker cannot do, and how the money works.
A broker is retained by you. An agent represents an insurer
That is the entire distinction, and everything else follows from it. A broker is engaged by you, holds contracts with a number of insurers, and takes your risk to whichever of them fits it. An agent represents one insurance company and sells that company's products. Both can be knowledgeable, ethical and genuinely helpful. Only one of them can tell you that a different insurer is the better answer this year.
What the job consists of
Buying the policy is a small slice of it. Laid end to end, a commercial broker's year looks like this.
- Understanding the operation. Not the industry code, the operation: what you do, where, for whom, with what equipment, under what contracts, with how many people and how much revenue. Almost every coverage error traces back to this step being done quickly.
- Building the submission. This is the document an underwriter reads: values, loss history, a description of the risk, and answers to the questions they would otherwise have to ask. A good submission is often the difference between a price and a decline.
- Choosing and approaching markets. Deciding which insurers and which managing general agents suit this risk, in what order, and arriving with something worth reading.
- Negotiating terms, not only price. Sublimits, deductibles, exclusions, endorsements, warranties. A cheaper policy carrying a protective safeguards warranty you cannot meet is not cheaper.
- Explaining what you bought. In plain words, including what it does not cover, before you sign rather than after a loss.
- Servicing the year. Mid-term changes, new vehicles, new locations, certificates of insurance, contract reviews, and the questions that arrive at four on a Friday.
- Advocating on claims. Reporting the loss, explaining the coverage, reading the proof of loss before you swear it, chasing a file that has gone quiet, and challenging a valuation that looks light.
- Running the renewal. Starting early enough to do something about it, deciding whether to remarket or hold, and saying which of those is in your interest rather than theirs.
The duty behind the advice
This is what separates a broker, and it is a legal standard rather than a service promise. Canadian courts have held that a broker who takes on a client's insurance must exercise reasonable skill and care: to identify the foreseeable risks the business faces, to obtain coverage for them, and, where coverage cannot be obtained, to say so clearly enough that the client can decide what to do about it.
That is a positive duty to advise, not merely a duty to fill an order. A broker who quietly delivers exactly what was asked for, knowing that what was asked for leaves an obvious hole, has not done the job.
It is also why every Alberta brokerage carries errors and omissions insurance, and why "just get me the cheapest" is a request a competent broker will push back on. The pushback is not a sales technique. It is the standard they are held to.
How brokers are paid
Almost always by commission from the insurer, calculated as a percentage of your premium and already inside the price you were quoted. You do not write a separate cheque. Going direct to an insurer does not remove distribution cost either: a direct writer has its own sales and service costs built into its prices.
Two other things exist, and you are entitled to ask about both. Some brokerages charge a fee, instead of or alongside commission, which should be disclosed and agreed in advance. And most brokerages are eligible for a contingent profit commission: an additional payment from an insurer based on how profitable the business the brokerage placed with them turned out to be, and sometimes on how much of it there was. It is not guaranteed and it is not tied to any one policy, but it exists.
Broker, agent, direct writer
Four ways to buy, and they are not interchangeable for a commercial risk.
- A broker. Retained by you, reaches multiple insurers and MGAs, advises, and stays with the file through claims and renewals. The usual route for commercial business, because commercial risks vary too much for a fixed product set.
- An agent. Represents one insurer. Can be excellent inside that insurer's appetite, and has nowhere to go when your risk falls outside it.
- A direct writer. You buy from the insurer with no intermediary. Efficient for standard personal lines. On commercial, it means the person explaining your coverage and the person deciding your claim work for the same company.
What a broker cannot do
Worth being direct about, because overreaching promises are what damage the trade.
A broker cannot make an insurer quote your business, and cannot make one that has declined change its mind. A broker cannot create coverage by writing something onto a certificate: coverage changes are made to the policy, by endorsement, by the insurer. A broker cannot undo a submission another broker already put in front of a market. And a broker cannot move the wider market. When insurers pull back from a whole class of business, everybody's renewal moves, and the honest response is to explain why rather than promise otherwise.
What a broker does control is the quality of what an underwriter sees, the order in which markets are approached, the terms negotiated once a quote exists, and how hard your claim gets pushed. That is a great deal. It is just not everything.
It compounds, which is the argument for choosing carefully once
A broker who has known your business for five years knows why the equipment limit is what it is, remembers the 2023 claim and how it was presented, has a working relationship with the underwriter who holds your file, and can tell in October that your renewal is going to be difficult.
None of that transfers with a quote. Which is why the useful question is not what a broker costs, since the commission is in the premium either way. It is what yours is doing.
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