How do independent insurance brokers make money?

You pay the same amount ($1000). If you do not use a broker or agent, then the insurance company keeps the $100 to cover its extra costs for paying its staff to do the paperwork normally done by the broker and to answer the questions normally answered by the broker.

They get paid commission from the policies they sell. The PREMIUM is 100% paid to the insurance company. The Commission, gets paid directly from the company, to the broker. The broker can't hold back 10% of the premium, even if you DID pay it in full for the year - which most people don't. Insurance companies that don't use agents, STILL don't take 10% off the cost of insurance for you. See, in order for you to even know their name to call them, they must advertise heavily. They typically spend OODLES of money advertising (ever hear of "Flo"? Or a particular lizard?"). If you don't know to call them, you won't call, and they can't write business. And advertising is EXPENSIVE. So calling a company directly, you'll get a company you've heard of - because between Progressive and Geico, they spend FOUR BILLION DOLLARS a year on advertising. But you can still get a very competitive, and sometimes cheaper rate from a company you may NOT have heard of - but is sitll A rated, like Erie, Merchants Mutual, Merrimack, etc . . . companies who don't spend four billion a year on advertising, but instead give the agent 10% of the policy cost in commission.

In your example, you'd still pay $1,000 to the company, but they'd keep the $100. But, when you have a billing or claim issue it'll be you against the insurance company. You no longer have an advocate on your side. Otherwise, the company would send a $100 check to the broker (in your example) and you'd have impartial third party advice from an industry expert.