Glossary · Insurance agency commissions
Commission chargeback
A commission chargeback is commission a carrier takes back, usually after a cancellation, a premium-reducing endorsement or an audit returns premium.
What it means
In P&C, commission is generally earned only on premium the insured keeps paying for. When premium goes back to the insured, the commission on it usually goes back to the carrier. Most chargebacks are legitimate. The ones worth catching are taken at the wrong rate, taken twice, or left in place after a cancellation was reversed.
Chargebacks can arrive well after the event, especially for backdated cancellations and audits. Keeping your own list of cancellations and premium-reducing changes makes each negative line easier to match.
How it shows on a commission statement
On direct bill, a chargeback is a negative commission line, usually next to a negative premium. On agency bill, it appears as a return premium with negative commission and reduces what you owe the carrier. The expected amount is normally the returned premium times the rate the commission was originally paid at.
Example
- Return premium
- −$600.00
- Rate originally paid
- 12%
- Expected chargeback
- −$72.00
- Charged back on statement (15%)
- −$90.00
- To raise with the carrier
- $18.00
Common mistakes to check
- Commission taken back at a higher rate than it was paid.
- The same chargeback taken on two statements.
- A cancellation reversed by reinstatement, with no reversal of the chargeback.
- A chargeback on a non-payment cancellation where commission was only ever paid on collected premium.