Broker Compensation

Our Relationship with Insurance Brokers and Broker Compensation explained:

The following information is provided in keeping with our ongoing practices of full disclosure and transparency:

Travelers Canada's personal and business insurance policies are available exclusively from insurance brokers. Our broker agreements require that brokers and Travelers Canada exercise the utmost diligence, honesty and good faith in performing their duties, in properly and promptly servicing policies, and in our communications and dealings with policyholders.

We compensate brokers in two ways. Firstly, we pay brokers a fixed percentage of the premium a policyholder pays. This varies by type of business, as shown in the table below, and there may be specific cases where such fixed percentages differ from the amounts set out in the table below. Secondly, we have a contingent commission program that recognizes brokers for helping us to write profitable business; allowing us to remain well-capitalized to pay claims and to keep our premiums competitive. Neither Travelers Canada nor the broker knows which policy will have a claim, so the objective is to have sufficient policies without claims to pay the claims of the rest.

We have the technical understanding and statistical evidence to know the premium that should be charged for certain types of business and we set prices to compete for that business. Contingent commission rewards those brokers who understand our market expertise and whose insurance portfolio is made up of the kind of business we seek to write.

Travelers Canada's contingent commission program is based mainly on the profitability of the broker's total portfolio of business. It also takes into account the amount of business we transact with the broker. Travelers Canada's priorities are to meet obligations to policyholders and shareholders. In addition, to ensuring full entitlement to the coverage contracted when there is a claim, our responsibility to policyholders extends to prudent management of future costs so that pricing is stable and reasonable. This is essential for strong corporate governance, effective management, and a reasonable return on the capital invested, enabling us to meet our commitment to shareholders. Insuring cars, homes and businesses that we price accurately is fundamental to meeting these commitments.

In addition to commission, some brokers earn service fees (a fixed percentage of premiums or a transaction fee) for performing services such as underwriting, data input, and administration on our behalf. Where costs are incurred by a broker in moving business to Travelers Canada, or specific costs are incurred in supporting Travelers Canada’s business, we may offer compensation to that broker to offset the cost. In addition, we may occasionally pay a bonus commission for new business in a particular area or segment that we are seeking to grow. Loans are made to support brokers in the development of their brokerage businesses including the acquisition of other brokerages, or for succession - where one broker may buy out the interests of a retiring colleague. Many brokers find bank or private non-insurance company financing difficult to obtain or available only on punitive terms because lending institutions do not always recognize the full value of the broker's principal asset which is the customer list. These other lenders often attempt to encumber the personal assets of brokers as security.

For Travelers Canada, building the relationship with a broker is a key aspect of any financing arrangement and, as such, loan agreements may include premium targets. Travelers Canada's loan agreements stipulate in every case where a premium target is set, that the broker must act in their customers’ best interest. This is the overriding priority.

Our support of brokers allows them to continue to be successful in providing consumers and businesses with expert advice, choice and excellent service.

Line of Business

Base commission

Automobile
(except high risk and special purpose vehicles)

12.5%

High Risk and Special Purpose Vehicles

7.5 to 10%

Property (includes home-owners and tenant policies, personal and commercial policies)

12.5 to 20%

Group insurance and programs

10% to 25%

Liability - commercial umbrella

15%

Liability - other

20%

Forgery, burglary, glass, boiler and machinery 

20%

Contract Surety

27.5% and below

Commercial Surety

27.5% and below

Management and Professional Liability

15%