Glossary · Insurance agency commissions
Agency bill
Agency bill means the agency invoices the insured, collects the premium, keeps its commission and sends the net premium to the carrier.
What it means
Agency bill is often used for larger commercial accounts, where the agency wants to control billing, combine several policies on one invoice, or arrange payment terms with the client. The agency holds the collected premium in a fiduciary capacity until it pays the carrier, which is why agency bill comes with trust account rules in many states.
The carrier sends a statement, often called an account current, listing the transactions billed in the period. The agency pays the net amount by the due date in its agency agreement. Many agreements require payment by that date whether or not the insured has paid the agency yet; check what yours says.
How it shows on a commission statement
Each line typically shows gross premium, the commission rate and amount, and the net due to the carrier. Return premiums and chargebacks appear as negative lines that reduce what you owe. Instead of a deposit to check, you have a payment to make, so an error in the carrier’s favor costs you directly when you pay.
Example
- Gross premium invoiced to insured
- $8,500.00
- Commission at 15%
- −$1,275.00
- Net premium due to carrier
- $7,225.00
Common mistakes to check
- Paying the carrier’s total without checking that each line uses your contracted rate.
- Endorsements the carrier bills you for that never got invoiced to the insured.
- Return premium credited by the carrier but not yet refunded or credited to the insured.
- Mixing premium with operating funds. How strictly that is regulated depends on your state.