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🤝 '''Agent commission''' is the compensation paid to an [[Definition:Insurance agent | insurance agent]] or [[Definition:Insurance broker | broker]] for producing and servicing [[Definition:Insurance policy | insurance policies]] on behalf of an [[Definition:Insurance carrier | insurance carrier]]. Expressed as a percentage of the [[Definition:Premium | premium]] written, commission rates vary by [[Definition:Line of business | line of business]], market conditions, and the agent's contractual arrangement with the insurer. It represents the primary economic incentive that drives the distribution of insurance products through agency and brokerage channels.

🔧 Commission structures can take several forms. A flat or base commission is paid at policy inception and often again at [[Definition:Renewal | renewal]], typically at a lower renewal rate to reflect the reduced effort involved. Many carriers also offer [[Definition:Contingent commission | contingent commissions]] or profit-sharing arrangements that reward agents when their [[Definition:Book of business | book of business]] performs well — meaning [[Definition:Loss ratio (L/R) | loss ratios]] stay below agreed thresholds. In [[Definition:Delegated underwriting authority (DUA) | delegated authority]] structures, a [[Definition:Managing general agent (MGA) | managing general agent]] may receive a higher commission to reflect the additional [[Definition:Underwriting | underwriting]] and administrative responsibilities it assumes. Commission schedules are documented in the agency agreement and typically regulated at the state level to prevent unfair trade practices.

📈 The way commissions are structured shapes the behavior of an insurer's entire distribution channel. Generous upfront commissions can accelerate growth but increase [[Definition:Acquisition cost | acquisition costs]] and pressure the [[Definition:Combined ratio | combined ratio]]. Conversely, performance-based commissions align agent incentives with [[Definition:Underwriting profit | underwriting profitability]], encouraging better risk selection. In the [[Definition:Insurtech | insurtech]] era, some digital distributors operate on reduced commission models or flat-fee arrangements, challenging the traditional percentage-of-premium approach. Regardless of structure, commission expense is one of the largest controllable cost components in an insurer's income statement and a key lever in pricing and profitability strategy.

'''Related concepts'''
{{Div col|colwidth=20em}}
* [[Definition:Agent balance]]
* [[Definition:Contingent commission]]
* [[Definition:Acquisition cost]]
* [[Definition:Combined ratio]]
* [[Definition:Agency agreement]]
* [[Definition:Managing general agent (MGA)]]
{{Div col end}}

Definition:Agent commission - Revision history

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