Glossary · Insurance agency commissions
Direct bill
Direct bill means the carrier invoices and collects premium from the insured, then pays the agency its commission, usually on a monthly statement.
What it means
Under direct bill the agency never handles the premium. The insured pays the carrier, by card, bank transfer or an installment plan, and the carrier sends the agency its commission. Direct bill is common in personal lines and small commercial business, though the split between direct and agency bill varies by agency and by carrier.
The detail that matters most is when commission is paid. Some carriers pay commission on the full premium when the policy is written. Others pay it as premium is collected, so a policy on a monthly payment plan produces a small commission line every month. Your agency agreement or the carrier’s billing rules say which applies.
How it shows on a commission statement
A direct bill statement lists positive lines for new business, renewals and additional premium, and negative lines for return premium and chargebacks. The net total is paid to you by bank transfer or check. If the carrier pays as collected, expect installment lines that repeat month after month for the same policy, and gaps when an insured misses a payment.
Example
- Annual premium, 12 monthly installments
- $2,400.00
- Installment
- $200.00
- Commission rate
- 12%
- Expected commission per installment
- $24.00
- Expected after 3 installments
- $72.00
Common mistakes to check
- Assuming commission arrives up front when the carrier pays as collected, or the other way round. Both make the month look wrong.
- Missing installment lines. One skipped month on a pay-as-collected policy is easy to overlook.
- Not matching the deposit to the statement total before checking lines.
- Expecting a chargeback on a cancellation for non-payment when commission was only ever paid on what was collected.