Glossary · Insurance agency commissions
Commission rate
A commission rate is the percentage of premium a carrier pays an agency on a policy or transaction. It can differ by line, carrier and new vs renewal.
What it means
Rates are set in the carrier’s commission schedule and usually vary by line of business, by new versus renewal, and sometimes by state or program. Some commercial programs use sliding-scale arrangements, where the rate depends on results; those are spelled out in their own agreements.
The rate is the quickest thing to check on any statement line, and one of the most common places for errors to hide.
How it shows on a commission statement
Many statements show the rate in its own column. Others show only premium and commission, so the effective rate is commission divided by premium. Allow a cent or two for rounding before flagging a difference.
Example
| Policy | Premium | Commission | Effective rate | Schedule |
|---|---|---|---|---|
| EX-22104 | 1,840.00 | 276.00 | 15.0% | 15.0% |
| EX-22117 | 2,310.00 | 277.20 | 12.0% | 12.0% |
| EX-22130 | 1,500.00 | 150.00 | 10.0% | 12.5% |
EX-22130 should have paid $187.50 at 12.5%, so in this example $37.50 is owed.
Common mistakes to check
- Flagging rounding differences of a cent as errors.
- Recomputing on the wrong premium base, for example including a non-commissionable fee.
- Not noticing a schedule change part-way through the year.
- Assuming one rate per carrier when it differs by line and state.