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💰 '''Commission schedule''' is the structured framework that defines the [[Definition:Commission | commission]] rates, tiers, and payment terms an [[Definition:Insurance carrier | insurer]] or [[Definition:Managing general agent (MGA) | MGA]] offers to [[Definition:Insurance broker | brokers]], [[Definition:Insurance agent | agents]], and other [[Definition:Intermediary | intermediaries]] for placing and servicing [[Definition:Insurance policy | policies]]. It functions as the economic backbone of the intermediary relationship, specifying what percentage of [[Definition:Premium | premium]] — or in some cases, a flat fee — the distributor earns for each transaction, broken down by [[Definition:Line of business | line of business]], product type, new business versus [[Definition:Renewal | renewal]], and sometimes volume thresholds that trigger higher rates.

📑 Commission schedules vary widely across markets and product lines. In [[Definition:Personal lines | personal lines]], commissions on [[Definition:Motor insurance | auto]] or [[Definition:Homeowners insurance | homeowners]] policies might range from modest single-digit percentages, while [[Definition:Life insurance | life insurance]] first-year commissions in many markets — particularly in Asia, the Middle East, and parts of Europe — can be substantially higher, reflecting the longer-term value of the relationship. [[Definition:Commercial insurance | Commercial]] and [[Definition:Specialty insurance | specialty lines]] schedules tend to be negotiated individually, with rates influenced by the complexity of the risk, the broker's volume commitments, and competitive pressure from rival carriers. Some schedules incorporate [[Definition:Contingent commission | contingent commissions]] or profit-sharing provisions that pay additional compensation if the broker's portfolio meets certain [[Definition:Loss ratio | loss ratio]] or growth targets. [[Definition:Delegated underwriting authority (DUA) | Delegated authority]] arrangements with [[Definition:Managing general agent (MGA) | MGAs]] typically feature higher base commissions to reflect the expanded role the MGA plays in [[Definition:Underwriting | underwriting]], [[Definition:Policy administration | policy administration]], and sometimes [[Definition:Claims management | claims handling]].

🔎 The design of a commission schedule sends a powerful signal to the distribution market about what an insurer values. A schedule that heavily rewards new business over renewals will attract aggressive producers but may undermine [[Definition:Client retention rate | retention]]. One that emphasizes [[Definition:Loss ratio | loss ratio]]-linked bonuses encourages [[Definition:Intermediary | intermediaries]] to focus on risk quality, aligning distribution incentives with [[Definition:Underwriting profit | underwriting profitability]]. Regulators in several jurisdictions have scrutinized commission practices — notably, the disclosure of [[Definition:Contingent commission | contingent commissions]] became a major industry issue in the United States following regulatory investigations in the mid-2000s, and the EU's [[Definition:Insurance Distribution Directive (IDD) | Insurance Distribution Directive]] imposes transparency requirements around intermediary remuneration. Ultimately, a well-constructed commission schedule balances competitive attractiveness to distributors with sustainable economics for the carrier.

'''Related concepts:'''
{{Div col|colwidth=20em}}
* [[Definition:Commission]]
* [[Definition:Contingent commission]]
* [[Definition:Insurance broker]]
* [[Definition:Managing general agent (MGA)]]
* [[Definition:Channel distribution strategy]]
* [[Definition:Loss ratio]]
{{Div col end}}

Definition:Commission schedule - Revision history

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