Gallagher is compensated in a variety of ways. The insurance coverages and services a client purchases through Gallagher may be subject to one or a combination of the following compensation arrangements:
- Commissions and Fees. Gallagher receives usual and customary brokerage commissions or fees (and occasionally fees in addition to commissions) for its services. In addition to such fees and commissions, Gallagher may also receive investment income on fiduciary funds temporarily held by it, such as premiums or return premiums. Commissions are typically a percentage of the premium charged by an insurer. Other parties, such as excess and surplus lines brokers, wholesalers, reinsurance intermediaries, underwriting managers, captive managers, third party administrators, claims adjusters and similar parties, some of which may be owned in whole or in part by Gallagher, may earn and retain usual and customary commissions and fees in the course of providing insurance products and risk management services to clients.
- Contingent Commissions. Gallagher may also participate in contingent commission arrangements with insurance companies that provide for additional contingent compensation if certain underwriting, profitability, volume or retention goals are achieved. Such goals are typically based on the total amount of certain insurance coverages placed by Gallagher with the insurance company, not on an individual policy basis. As a result, Gallagher may be considered to have an incentive to place insurance coverages with a particular insurance company.
- Supplemental Commissions. Some insurance markets, including Gallagher-owned intermediaries, have modified their commission schedule with Gallagher, resulting in an increase in some commission rates. These additional commissions, commonly referred to as “supplemental commissions”, are known as of the effective date of the policy, but some insurance companies are paying this commission later and apart from when commission is normally paid at policy issuance. Unlike contingent commissions, supplemental commissions are determined without regard to any performance factors contingent on underwriting, profitability, volume or retention goals.
- Other Benefits or Compensation. From time to time, Gallagher may participate in insurance company promotional events or training and development that insurers provide for Gallagher employees.
- Other Carrier Services. Gallagher strives to find appropriate coverage at a competitive price for our customers. In order to achieve these goals, we gather and analyze data about our customers and their insurance coverage. This data and the resulting analytical tools help us better understand the current marketplace, more accurately predict future trends and offer tailored solutions to our customers. The data may also be provided to insurers pursuant to consulting service agreements from which we earn fees.
Clients with more specific questions about the compensation received (or expected to be received) by Gallagher and its affiliates in relation to their insurance placements should contact their Gallagher representative for more details.