Commission on premium audits: how to check what the carrier paid or took back

TL;DR

• Auditable policies, such as workers compensation and many general liability policies, are written on an estimated premium and settled after the term on actual payroll, sales or other exposure.
• An audit produces additional premium or return premium. Commission normally follows it, at the rate your agreement sets for audit premium, which may not be the policy rate.
• The commission line can appear months after expiration. Match it to the expired term, not to the renewal now in force.
• On agency bill, audit premium the insured hasn’t paid is the risk: you may owe the carrier the net before you’ve collected anything.

This guide covers property and casualty policies that are audited after the term. We’re building Lapidar, a tool that will check commission statements line by line; it isn’t available yet. Practice varies between carriers and states, and your agency agreement governs.

What is a premium audit, and why does it change commission?

Some policies are priced on an exposure that isn’t known until the term is over: payroll for workers compensation, sales or payroll for many general liability policies. The carrier charges an estimated, or deposit, premium at the start and, after expiration, audits the insured’s records to find the actual exposure. The difference is audit premium: additional premium if the exposure was higher than estimated, return premium if it was lower.

Commission was paid on the estimated premium. When the audit moves the premium, commission on the difference moves with it. As Nancy Germond, the Big “I” executive director of risk management and education, puts it in an IA Magazine piece on workers compensation, “estimated payroll is just that, an estimate” (IA Magazine, July 2025). The further the estimate was from reality, the larger the audit line.

What does the arithmetic look like?

The commission on an audit is the change in premium times the rate that applies to audit premium. The example uses the same rate as the policy; yours may differ.

Workers comp audit · EX-41226Example data

Estimated payroll $500,000 at $2.00 per $100

$10,000.00

Commission paid at 10% on the deposit premium

$1,000.00

Audited payroll $650,000 at $2.00 per $100

$13,000.00

Additional premium from the audit

$3,000.00

Commission expected on the audit at 10%

$300.00

If audited payroll had been $420,000: return premium

$1,600.00

Commission taken back at 10%

−$160.00

When does audit commission show up?

Late. The audit can only start after the term ends, the insured has to supply payroll or sales records, and the carrier then processes the result and bills it. The commission line follows the billing, so it can land many months after expiration. By then the policy has usually renewed, sometimes under a new number, and the audit line sits on a statement alongside current business.

Two things follow. First, match an audit line to the term it belongs to: the expired policy’s number and dates, not the renewal. Second, keep expired auditable terms on a list until the audit result and its commission have both arrived, or the carrier has confirmed no audit change. A term that never produces an audit line is easy to forget, and you only notice the ones that arrive.

Is audit premium paid at the same rate as the policy?

Not always. Some agency agreements and commission schedules pay audit premium at the policy’s rate; others set a separate rate for audit premium, or treat it differently for new and renewal terms. We can’t tell you which applies to your carrier; your agreement and schedule do. What you can check on every line:

• The rate used matches the rate your agreement sets for audit premium on that policy and term.
• Return premium comes back at the rate the commission was paid at, not a higher one.
• The premium figure on the statement matches the audit summary: the change in premium, not the full audited premium.
• It appears once. Audit revisions happen; a revised audit should reverse the first result, not add to it.

How do agency bill and direct bill handle it?

On direct bill, the carrier bills the insured for additional audit premium and pays your commission on the statement, usually when it collects. Return premium goes back to the insured from the carrier, and the commission comes back as a negative line.

On agency bill, the audit usually appears on your account current. For additional premium you invoice the insured, keep the commission and remit the net, and the carrier may expect the net by the account current due date whether or not the insured has paid. For return premium you return premium to the insured and the commission comes back on the account current. Our guide to agency bill reconciliation covers the account-current routine.

What if the insured doesn’t pay the audit premium?

Audit bills arrive after the policy has ended, sometimes after the insured has moved to another agency or closed, so they can be harder to collect than ordinary installments. What happens to the commission depends on how the policy is billed and on your agreement:

• Direct bill: commission is often paid only as premium is collected, so an unpaid audit may simply produce no commission line. If commission was paid and the premium is later written off, it may come back.
• Agency bill: you may already have remitted, or be asked to remit, the net on premium you never collected. Raise it with the carrier when the insured disputes or won’t pay, rather than after the account current is due.

An insured disputing the audit itself, for example over a payroll classification, is a coverage and audit question for the carrier and the insured, and it can change the premium again. Leave the commission item open until the audit is final.

What about audits on cancelled policies?

A policy cancelled mid-term may still be audited for the period it was in force. The audit can then produce additional or return premium on top of the cancellation, so one term can carry both a cancellation chargeback and a later audit line. Check them together: the deposit premium, the return premium from the cancellation, then the audit result for the shortened term. If the commission taken back across both is more than was paid on the term, ask for the calculation. Disputing a chargeback is covered in how to dispute a commission chargeback.

How does the producer’s share work on audit commission?

If producers are paid a share of commission, audit commission and audit chargebacks usually flow to them under your producer agreement. The awkward cases are timing ones: the producer has left, or the account has moved to another producer, by the time the audit lands. Producer agreements often say which producer gets audit commission on a term and how audit chargebacks are handled; whatever yours says, apply it the same way every time. See producer commission splits.

Why this is hard at scale

An audit line refers to a term that ended months ago, often under a policy number your renewal no longer uses, and its amount wasn’t known in advance, so there is no expected figure waiting for it. Checking it means finding the expired term, its deposit premium and the rate paid, the audit summary, and any cancellation on the same term, then remembering every audited term that hasn’t produced a line yet. For a handful of commercial accounts that is manageable. Across every carrier and every month, it is the kind of item that slips.

Where Lapidar fits

We’re building Lapidar to tie audit lines on a statement to the expired term they belong to, check the rate and amount against what was paid on that term, and keep audited terms open until their result arrives, inside the Lapidar web app. Questions about the audit itself stay between you, the insured and the carrier; Lapidar won’t contact your carriers. It is in its founding pilot, it has no customers yet, and we’ll say so until that changes. If you’d like to try it, the founding pilot is open below.

Frequently asked questions

Do you get commission on additional premium from an audit?

Usually, but it depends on your agency agreement and the carrier’s schedule. Some pay audit premium at the same rate as the policy, some set a separate rate, and on direct bill the commission is often paid only once the carrier collects the audit premium. Check the agreement, then check the statement line against it.

Is commission taken back when an audit produces return premium?

Commonly, yes: commission comes back on the premium returned, normally at the rate it was paid at. Check that the amount matches the return premium on the audit and that it isn’t larger than the commission you were paid on that term.

Why does audit commission show up so long after the policy expired?

The audit can only start once the term is over, the insured has to supply records, and the carrier then has to process the result. The commission line follows that, often months after expiration and on a statement that otherwise covers current business.

Sources

1. IA Magazine, 3 Ways Agents Can Offer the Best Advice to Workers Comp Clients, by Olivia Overman, July 14, 2025. Retrieved October 10, 2026.

Lapidar is commission reconciliation software for independent insurance agencies, in its founding pilot. Related: audit premium · commission chargeback calculator.