An arranger fee is a commission paid to an insurance broker by a premium finance company for originating a premium finance agreement on behalf of a commercial client. It's one of the most underutilized revenue opportunities in independent insurance — and one of the most straightforward. If you're writing commercial accounts and not earning arranger fees, you're leaving money on the table on business you're already producing.
How arranger fees work
When a broker arranges premium financing for a client, they're connecting that client with a premium finance company (PFC) that funds the policy premium. In exchange for originating that loan relationship, the PFC pays the broker a fee — the arranger fee — as a percentage of the financed premium amount.
The key distinction: arranger fees are paid by the lender, not the client. The client pays the financing cost (interest) to the PFC. The broker's fee is a separate transaction between the broker and the PFC, and in most states it doesn't increase the cost to the client at all.
How much are arranger fees?
Arranger fees typically range from 1% to 3% of the financed premium amount, though the exact figure depends on the state, the lender, and the terms of your broker agreement.
Here's what that looks like in practice:
- $20,000 financed premium at 2% arranger fee = $400
- $50,000 financed premium at 2% arranger fee = $1,000
- $100,000 financed premium at 2% arranger fee = $2,000
- $250,000 financed premium at 2% arranger fee = $5,000
These fees are earned in addition to your standard carrier commissions — they're additive revenue, not a replacement for existing income. Across a book of commercial business with financed premiums, arranger fees can add up to tens of thousands of dollars annually.
Are arranger fees legal?
Yes — in most U.S. states, arranger fees are explicitly permitted by state insurance or premium finance regulations. However, the rules vary significantly by state:
- Some states permit arranger fees freely with no cap, as long as they're disclosed in the finance agreement.
- Some states cap the arranger fee at a specific percentage or dollar amount.
- Some states require specific disclosure language in the finance agreement or a separate disclosure to the client.
- A small number of states restrict or prohibit arranger fees entirely — brokers in those states may still earn other forms of compensation from PFC relationships.
Your premium finance company is responsible for ensuring that your fee arrangements comply with the regulations in each state where you write business. A reputable PFC like Patch will be transparent about what's permissible in your state and will structure the fee correctly in the finance agreement.
Do you need a special license to earn arranger fees?
In most states, no. Your existing producer license covers the arrangement of premium financing and the receipt of arranger fees. The activity is considered part of your role as a licensed insurance producer, not a separate lending or financial services activity.
That said, a small number of states have additional requirements — registration, disclosure forms, or other compliance steps. Your PFC should advise you on any state-specific requirements before you begin earning fees in that state.
How are arranger fees paid?
Arranger fees are typically paid by the premium finance company directly to the broker, either:
- At funding — when the PFC pays the insurer and the loan is active, or
- On a periodic basis — monthly or quarterly, aggregated across all funded loans
The payment timing and method depends on the PFC's broker agreement. Most modern platforms provide a broker dashboard where you can track earned fees in real time and view payment history.
Arranger fees vs. broker commissions: what's the difference?
These are two separate revenue streams that brokers earn on the same account:
- Broker commission — paid by the insurer as a percentage of the policy premium, for placing the coverage. This is your standard revenue.
- Arranger fee — paid by the premium finance company as a percentage of the financed premium, for arranging the loan. This is additional revenue on top of your commission.
Both are earned on the same transaction. A broker placing a $75,000 commercial package policy might earn a 12% commission ($9,000) from the carrier, plus a 2% arranger fee ($1,500) from the PFC — for a total of $10,500 on that one account.
Should you disclose arranger fees to clients?
In states that require disclosure, the arranger fee will appear in the premium finance agreement that the client signs. This is a legal requirement, not a choice — the PFC will include the appropriate disclosure language automatically.
In states where disclosure isn't mandated, many brokers still choose to be transparent about it. In practice, most clients don't object — they're focused on the monthly payment and total financing cost, not on the fee arrangement between their broker and the lender. And since the fee is paid by the lender, it doesn't change what the client pays.
Transparency builds trust. If a client asks whether you earn a fee on the financing arrangement, being straightforward about it — and explaining that it doesn't affect their cost — is always the right answer.
How to start earning arranger fees
To earn arranger fees, you need to be appointed with a premium finance company that pays them in your state. The process is typically straightforward:
- Apply to be an appointed broker with the PFC (usually a short online application)
- Review and sign the broker agreement, which will specify your fee rate and payment terms
- Start quoting premium financing for your commercial clients
- Earn a fee on every funded transaction
Patch is designed specifically for independent brokers and offers transparent arranger fee structures, fast appointment, and a digital workflow that makes it easy to present financing on every eligible account.
Frequently asked questions
Are arranger fees taxable income for brokers?
Yes. Arranger fees are ordinary income and should be reported accordingly. They're typically reported by the PFC on a 1099 form at year-end, similar to how commission income from carriers is reported. Consult your tax advisor for specifics.
Can I earn arranger fees in all 50 states?
No — state regulations vary. Most states permit arranger fees, but a few restrict or prohibit them. Your PFC should be able to tell you exactly which states they pay arranger fees in and what the applicable rules are.
Do arranger fees need to appear in the finance agreement?
In states that require disclosure, yes — the fee must be disclosed in the finance agreement the client signs. Your PFC handles this automatically. In other states, disclosure requirements vary.
What's the difference between an arranger fee and a broker fee?
In the premium finance context, these terms are often used interchangeably. Both refer to the compensation paid to a broker by a premium finance company for originating a premium finance loan. "Broker fee" is sometimes used more broadly in other financial contexts, but in premium financing, they mean the same thing.
How do I know if my PFC pays competitive arranger fees?
Ask directly. A reputable PFC will be upfront about their fee structure. Compare rates across a few lenders if you're evaluating options, and consider the full picture — fee rate, payment timing, platform quality, and state coverage — not just the headline percentage.
