Commission
In the insurance industry, a Commission is the fee paid to insurance agents or brokers by insurance companies for selling and servicing insurance policies. Commissions are typically calculated as a percentage of the premiums paid by the policyholders. This percentage can vary depending on the type of insurance product, the insurer’s policies, and the agent’s or broker’s agreement with the insurance company.
There are generally two types of commissions: initial commissions and renewal commissions.
- Initial commissions are earned when a new policy is sold, representing the effort and resources spent on acquiring new business.
- Renewal commissions are earned when existing policies are renewed, providing ongoing income for agents and brokers as they continue to service and maintain the policyholder’s account.
Commissions incentivize agents and brokers to sell insurance products and provide high-quality service to their clients. They play a critical role in the compensation structure within the insurance industry, rewarding sales performance and fostering long-term relationships between agents, brokers, insurers, and policyholders.