When fees are paid directly to the consultant, it’s no longer “out of sight, out of mind”. Commissions that are paid as part of the premium tend to go unrecognized.
Fee based Consultants are removed from the potential bias of placing business with a carrier that pays a higher commission level
Fee based Consultants provide the client with a contract; which defines their services, responsibilities and fee structure.
When the employer receives an increase to their rates, the commission-based consultant receives a pay increase. As such, the consultant has less incentive to negotiate rates or recommend more efficient plan designs.
Since commissions are part of the premiums paid to the carrier, taxes, administrating fees, reserves, and conversion charges are applied to those commission dollars. These additional charges amount to approximately 14%. For example, if a consultant is being paid $100,000 annually in commissions, the carrier will charge the employer $114,000 in premiums.