Glossary · Insurance agency commissions
Policy fee
A policy fee is a flat charge added to a policy by the carrier or the agency, separate from premium, and in most cases not subject to commission, though the rules depend on the carrier and the state.
What it means
Fees come in several kinds: a carrier policy fee that is part of the carrier’s filing, an agency fee the agency charges for its own services, and installment or other charges. They are treated differently, and which is which is set by carrier rules and state law rather than by the label.
On a reconciliation the question is simple to ask and slow to answer: was this amount commissionable, and did the carrier treat it that way?
How it shows on a commission statement
Some statements show fees on their own line or in a separate column, others fold them into the premium. If a fee is inside the premium base, the commission may be calculated on a number that is too high or too low compared with your records.
Example
- Policy premium
- $1,800.00
- Policy fee
- $75.00
- Commission at 12% on premium only
- $216.00
- Commission if the fee were included
- $225.00
Common mistakes to check
- Assuming all fees are non-commissionable, or that all are commissionable.
- Comparing premium in your system with a statement base that includes fees.
- Mixing an agency fee into carrier commission when reconciling.
- Not knowing how your state treats fees. Check with your state and your accountant.
Lapidar is commission reconciliation software for independent insurance agencies, in development. Related: how to reconcile carrier commission statements.