Glossary · Insurance agency commissions
Return premium
Return premium is premium a carrier refunds to the insured, most often after a cancellation, an endorsement that reduces coverage, or an audit that finds a smaller exposure than estimated.
What it means
How much is returned depends on why. A carrier cancellation is usually refunded pro rata; a cancellation the insured asks for may be refunded on a short-rate basis if the policy allows it. Some policies also have a minimum earned premium, and policy fees are often not refundable, so the return can be less than the unused share of the premium.
On agency bill, the agency usually owes the refund to the insured, or a credit on their account, once the carrier credits it.
How it shows on a commission statement
Return premium appears as a negative premium amount, normally with a negative commission beside it at the policy’s rate. On agency bill it reduces the net you owe the carrier for the period. On direct bill it reduces the commission paid to you.
Example
- Vehicle removed mid-term, return premium
- −$240.00
- Policy commission rate
- 10%
- Expected commission reversal
- −$24.00
Common mistakes to check
- Commission reversed at a different rate from the one originally paid.
- A return premium in your management system that never shows up on the statement, or the reverse.
- On agency bill, a credit taken from the carrier that never reached the insured.
- Treating a minimum earned premium or a non-refundable fee as a carrier error.