In practice, the vast majority of the insurance market has adopted the model of payment of brokerage remuneration by an insurance company in the form of a courtage. A client who through the broker’s activities concludes an insurance contract with an insurance company does not bear, therefore, the burden of payment of the courtage, although it is on the client’s behalf, and not on behalf of the insurance company, that the broker operates.
In such a model, after concluding an insurance contract by and between a client and an insurance company, a broker receives remuneration from this insurance company. The broker and the insurance company are cooperating under a so called courtage agreement which determines the principles of such cooperation and financial settlements of the courtage.
The amount of the courtage is usually defined as a percentage of the premium paid. It often depends also on the type of risk to be insured, or other relevant factors. The terms and conditions of the brokerage remuneration are often referred to in courtage agreements or cooperation agreements.
Insurance companies, in principle, are willing to agree to such a model. And even if there is a dispute arising against payment of the courtage, which in practice happens quite often, as a rule, they do not question the general basis of paying the courtage, but rather its amount and legitimacy in a given situation.
It should be pointed out that in such a model, the question arises as to the correctness of such a practice in the light of the statutory independence of the profession of a broker. Under art. 24 item 1 point 2-4 and item 2 point 1 of the Act on insurance intermediation, a broker acting on behalf of a client (as well as members of its bodies when it is a legal person and persons performing brokerage activities as its employees) as a rule cannot remain in any permanent contractual relationship with an insurance company, be a member of its supervisory or management body, nor possess shares of the insurance company, except for those authorized for trading on a regulated market. However, the same Act indicates that these restrictions do not concern, among others, an agreement concluded by an insurance broker with an insurance company, on mutual financial settlements in respect of the brokerage activities. The law itself therefore considers courtage agreements as an appropriate basis and mode of paying a broker courtage for the activities performed. However, what should be stressed is that such agreements cannot in any way make the broker dependent on the insurance company.
The insurance market has also developed another model of brokerage remuneration payment. In this model the broker is paid remuneration for the activities performed by the entity seeking insurance coverage (the client), under a mutual agreement. A client who through a broker’s activities concludes an insurance contract with an insurance company in this case bears the burden of payment of the brokerage remuneration, for all the activities that the broker has performed on his/her behalf.
This model is much less frequent in practice, however it should be considered more in line with the statutory specific character of the profession of a broker. The Act on insurance intermediation provides for the principle of the broker’s independence from the insurance company, as mentioned above. An insurance broker shall act solely in the name and on behalf of an entity seeking insurance coverage and be fully independent from the insurance company whose product it recommends to the client.