Buying an insurance book of business? Verify the commission income first

TL;DR

• A book is a stream of future commission. The seller’s revenue report summarizes it; the carrier statements are the record behind it.
• Ask for the statements themselves, the policy and expiration list, the agency and producer codes, the chargeback history, and contingent payments shown apart from base commission.
• Tie the revenue to the statements carrier by carrier and month by month. Totals can nearly agree while the lines underneath don’t.
• Appointments, access through networks or aggregators, commission rates, agent-of-record status and contingent agreements don’t necessarily move with the sale. After closing, watch every renewal until it is paid to you.
• Price, terms and who carries a late chargeback belong in the agreement, settled with your advisors.

We’re building Lapidar, software meant to check carrier commission statements line by line against an agency’s book. It isn’t ready yet. This guide covers one part of buying another agency’s book of business: whether the commission income you are shown is what the carriers actually paid.

This is general information, not valuation, legal or tax advice. It says nothing about what a book is worth or how a deal should be structured. The Big “I” advises buyers to make sure their lawyer and accountant know insurance agency transactions (Big “I”). Ask them before you rely on anything here.

You are buying a stream of commission, not a list of policies

The Big “I” page on buying an agency describes the buyer as purchasing “an existing stream of cash flow”, because the contracts and clients are already in place (Big “I”). For an independent agency, most of that stream is commission on the policies it sells, as an IA Magazine article on acquisitions points out (IA Magazine, 2025).

A list of policies tells you what is in force. It doesn’t tell you what each policy paid, at what rate, or under whose code. Those answers are on the carrier statements.

Between the policy list and the statements sits the seller’s own summary: a profit-and-loss statement, or a commission report from the seller’s agency management system. Neither is necessarily wrong, but both are the seller’s account of the revenue. The check is whether they agree with what the carriers paid.

What to ask the seller for

A due-diligence article in the Big “I” Virtual University library splits the review into 17 segments. On the financial side it refers to five years of history for commission income and total revenue, and measures retention by customers, policies, premium and commissions (Big “I” VU). IA Magazine’s list of areas to evaluate asks for retention by revenue, premium, policies in force and customers, and for the growth rate over the past three years (IA Magazine, 2022).

For the commission check itself, we would ask for:

• The carrier commission statements for every carrier and every month of the period the revenue figures cover, plus any network or aggregator statements. A profit-and-loss statement shows commission as one line; the statements show where it came from. For agency bill business the commission sits on the carrier’s account current instead, so ask for those too.
• The policy and expiration list from the AMS: policy number, named insured, carrier, line of business, effective and expiration dates, premium and bill type.
• The agency and producer codes the business is paid under, including any held through a network or aggregator.
• The commission schedules in force with each carrier, so the rate paid can be checked against the rate agreed.
• The chargeback history: the negative lines on past statements, and the cancellations and premium-reducing changes behind them.
• Contingent and bonus payments, listed separately from base commission, with the carrier’s calculation worksheet where one exists.

Not every seller hands these over. The Big “I” VU article opens with one that would share only its financial statements; the buyer made a vague offer, with its assumptions written into the letter of intent and the diligence left until after acceptance (Big “I” VU).

Tie the revenue to the statements, carrier by carrier

The check runs both ways. Does the commission income reported for each carrier and month add up to what that carrier’s statements paid? And does each statement line belong to a policy in the book you are buying? Totals are only the start, because differences in opposite directions cancel out. Under the totals, four kinds of line need a note:

• Statement lines with no policy. The carrier paid on something that isn’t in the book. It may be a policy never entered, or business under a code or producer not included in the sale. Until you know which, you don’t know whether that revenue comes with the book.
• Policies with no commission. The book shows an active policy and no statement pays on it. Some were cancelled and never marked, some are paid under another code, some are unpaid. Until each is explained, the book may overstate what it pays.
• Rates against the schedule. Compare the rate paid with the rate on the schedule, line by line. Where a carrier pays a different rate on renewals than on new business, a year heavy in new business also says little about what the same policies will pay when they renew.
• One-offs. Contingent commissions, bonuses, an unusually heavy month of new business, a large account written once. They are real money; keep them apart from the commission the book pays year after year.

In this example the totals are $310.00 apart, which looks like one modest gap. The lines say otherwise: $185.00 paid on a policy that isn’t in the book, $420.00 of commission the book expects and no statement paid, a line paid $75.00 below the schedule on $2,500.00 of premium, and $4,800.00 that comes back only if the carrier’s profit-sharing formula pays out again. A real carrier-month has far more than five lines, and the book has many carriers.

Timing makes all of this harder: installment plans pay in pieces, and a policy missing one month can turn up the next, so open items have to be carried forward and checked again. Our guide to reconciling carrier commission statements covers these checks.

What does not move to you automatically

A book that ties out is still a record of what the seller was paid. Whether the same commission reaches you depends on arrangements that don’t transfer just because the sale closes.

Appointments

IA Magazine warns buyers not to assume a carrier will appoint them because they bought an agency that writes with it. Each carrier has its own approval process for new agencies, and when this is left too late, buyers end up rewriting books on top of the rest of the integration (IA Magazine, 2022). Set every carrier in the seller’s book next to your own carrier appointments and mark the gaps: revenue under those carriers depends on an approval you don’t have yet.

Shared carriers, networks and aggregators

Where both agencies reach the same carrier, the same article asks whether each has a direct appointment or goes through a network or aggregator, and advises against assuming the carrier will move all of the seller’s business under your direct appointment; depending on your volume and performance, it may not. It also asks what the purchase will do to your commission rates and contingencies, and whether the seller’s network, cluster or aggregator relationships could affect the sale (IA Magazine, 2022).

Business that does move is normally paid on your own schedule with that carrier, so the seller’s rates may not be yours. Business placed through an aggregator is typically paid on the aggregator’s statement, after its share, so part of the seller’s revenue may never appear on a carrier statement.

Agent of record and renewal continuity

Each policy has to renew under your agency and your code for the renewal commission to reach you. An agent-of-record change, a code that stays with the seller, or a renewal issued under a new policy number can each separate a policy from its payment. We list the usual causes in why carriers stop paying renewal commissions.

Contingent agreements

A 2025 IA Magazine article on contingent compensation in acquisitions calls transferability “a critical issue”: “will the acquired agency’s carrier appointments and profit-sharing agreements transfer to the buyer?” It says that in good years contingent compensation may account for 10% to 20% or more of an agency’s annual revenue, and that by its nature it is unpredictable. It also notes concerns, especially in personal lines acquisitions, “that the seller’s book might dilute or disrupt the buyer’s contingency agreements” (IA Magazine, 2025). The statements can show how much contingent money the seller received and when. They can’t show whether those agreements will pay you. Insurance agency profit sharing covers how these payments are calculated and checked.

Chargebacks on recently written business

Commission on a policy written shortly before closing has been paid, but not necessarily kept. If the insured cancels, an endorsement lowers the premium, or an audit returns premium, the carrier takes back the commission on the returned premium. That commission chargeback can arrive months later, on whatever code and statement the policy then sits on.

So if a chargeback arrives after closing on commission the seller was paid before closing, who carries it? We can’t give a general answer. Settle this in the agreement with your advisor. What the statements can give you is the size of the question: how much new business the seller wrote in the months before the sale, how often this book has produced chargebacks, and which carriers they came from. Our guide to commission chargebacks covers how to check each one.

The first renewal cycle after the transfer

The Big “I” page tells buyers of a book to analyze client retention and the overall rate of renewal before buying (Big “I”). After closing, retention stops being a figure in a report and becomes a series of renewals that either pay you or don’t. IA Magazine suggests identifying accounts that could be at risk in a transition because of a personal relationship with the current owner (IA Magazine, 2022); those are the renewals to look for first.

Turn the expiration list you received at closing into a list of renewals you expect, month by month, and check each statement against it, policy by policy. A renewal that isn’t paid doesn’t leave a line, so it only shows up when you start from the list and look for each policy in turn, as our guide to missing renewal commissions explains. Keep going until every policy in the purchased book has come up for renewal under your agency at least once.

Why this is hard at scale

None of the individual checks is mysterious; the work is in the volume and the formats. The Big “I” page calls buying a book “a lengthy and involved process” (Big “I”). Checking the commission income adds its own work:

• The seller’s statements come from every carrier in the book, each with its own layout, column names and transaction codes, and many arrive as PDF.
• Older statements may sit in carrier portals behind the seller’s login, and pulling them takes the seller’s time in the middle of a deal.
• Policy numbers in the seller’s AMS often don’t match the carrier’s exactly. Prefixes, term suffixes, dashes and leading zeros differ by carrier.
• Codes change over the years, especially in an agency that has bought books of its own, so one carrier may pay under several codes.
• The check doesn’t end at closing. The same comparison has to run on your own statements every month through the first renewal cycle.

Where Lapidar fits

This is the work Lapidar is being built to do: read carrier statements in their own formats, match each line to a policy in the book, and flag commissions that are missing, underpaid or paid twice. A seller’s statements are the same problem with more at stake. Lapidar is in development, it has no customers yet, and it can’t help with a deal you are working on this month. If you’d like to try it when it’s ready, the early-access list is below.

Frequently asked questions

Can I rely on the seller’s AMS commission report?

Not on its own. An AMS commission report shows what was entered in the seller’s system, and that can differ from what carriers paid: commission recorded but never received, payments never entered, or a contingent payment counted as ordinary commission. Treat it as the seller’s summary and check it against the carrier statements it should be built from, carrier by carrier.

How many months of statements should I ask for?

Ask for statements covering the same period as the revenue figures you rely on, and at least one full policy term, so every policy in the book should appear on a statement at least once. A due-diligence article in the Big “I” Virtual University library refers to five years of history for commission income and total revenue, and the 2025 IA Magazine article on contingent compensation says banks assessing an agency’s creditworthiness look at three- to five-year financial trends.

Do contingent commissions count as recurring revenue?

Keep them separate. Contingent payments depend on results such as loss ratio, growth and retention over a period, and IA Magazine describes them as unpredictable by nature, even when they are a large share of revenue in good years. Whether the seller’s profit-sharing agreements transfer to you is another question. How any of this affects value is a question for your advisor.

Sources

• Independent Insurance Agents & Brokers of America (Big “I”), Buying an Insurance Agency. Retrieved October 7, 2026.
• Big “I” Virtual University, Agency Acquisitions and Due Diligence, by Al Diamond (Agency Consulting Group, 2004), posted May 8, 2012. Retrieved October 7, 2026.
• IA Magazine, 8 Areas to Evaluate Before Acquiring an Agency, by Carey Wallace, November 1, 2022. Retrieved October 7, 2026.
• IA Magazine, How Contingent Compensation Is Factored Into an Agency Acquisition, by Keith J. Mangini, October 30, 2025. Retrieved October 7, 2026.

Lapidar is commission reconciliation software for independent insurance agencies, in development. Related: commission audit for independent agencies.