BROKER COMPENSATION AND FINANCING

Information about broker compensation and financing by Lombard General Insurance Company of Canada, Lombard Insurance Company, and Zenith Insurance Company (the “Lombard Companies”)

HOW WE CONDUCT BUSINESS

The Lombard General Insurance Company of Canada and Lombard Insurance Company sell both commercial and personal insurance exclusively through independent brokers. When a customer purchases our products through an independent broker, that broker acts on behalf of the customer, providing professional advice and the choice of insurance products offered by a number of insurance companies, not just Lombard. We work with only about 200 brokers across Canada, and take great care to ensure that the brokers with whom we conduct business are highly skilled insurance professionals.

The Zenith Insurance Company specializes in writing homeowners and automobile insurance for the 50-plus market in selected provinces. Zenith Insurance Company products are available through our own licensed agents.

BROKER COMPENSATION

Commissions

Brokers earn their commission out of the insurance premium you pay. Commissions paid on policies issued by the Lombard Companies are calculated at a fixed percentage of the premium. The range of commissions paid varies by the type of business, as described in the chart below:
   

Broker Commission Schedule
Personal Insurance:
Private Passenger Automobile	12.5%
Personal Household & Property	20.0%
Personal Umbrella Liability	20.0%
Commercial Insurance:
Commercial Automobile	7.5% to 12.5%
Commercial Property	20.0%
Commercial General Liability	20.0%
Commercial Umbrella Liability	15.0%
Other Commercial classes of business	20.0%

Contingent Profit Commissions

In addition, your broker may be paid an annual contingent profit commission. These payments are based on the total book of business the broker places with the Lombard Companies rather than on the premiums of your individual policy. Profit commissions are paid to the broker only if that entire book of business earns a profit in that year. If the book of business is profitable, the amount we pay will also take into account the amount of business placed with us by that broker. In 2008, profit commission payments represented less than 1% of the Lombard Companies' direct premium revenue.

Reimbursement of Costs of Other Services by Brokers

Some brokers provide additional services or activities such as advertising, underwriting, data entry, claims processing and administration. The Lombard Companies reimburse these brokers for the cost of providing these services on our behalf.

BROKER FINANCING

Many Insurance Brokerages are small to medium sized owner-operated businesses – one of the last bastions of the owner-operated enterprise in this country. Succession or perpetuation planning has always been a challenge for these owner-operated businesses. It has been a long standing tradition, going back to the late 1970's, for the Lombard Companies to work with brokers to ensure the perpetuation of their businesses so that they can retire and the next generation can take over the brokerage and provide ongoing service to their customers.

From time to time, Lombard provides assistance in the form of debt and/or equity financing to help our brokers accomplish their perpetuation plan. Brokers who are being assisted are not required to steer insurance business our way when it conflicts with the interest of the customer.