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💰 '''New business commission''' is the [[Definition:Commission | commission]] paid to a [[Definition:Broker | broker]], [[Definition:Agent | agent]], or other [[Definition:Intermediary | intermediary]] for placing a [[Definition:Policy | policy]] with an [[Definition:Insurance carrier | insurer]] for the first time, as distinct from [[Definition:Renewal commission | renewal commission]] earned when an existing policy is continued into a subsequent term. In the insurance distribution chain, new business commission compensates the intermediary for the effort involved in identifying prospects, assessing their [[Definition:Risk | risk]] profiles, obtaining [[Definition:Quote | quotes]], and advising the client through the initial purchase decision — work that is typically more labor-intensive than renewing an existing relationship.

⚙️ The rate of new business commission is usually expressed as a percentage of the first-term [[Definition:Premium | premium]] and is negotiated between the intermediary and the carrier or [[Definition:Underwriter | underwriter]], though market norms vary considerably by geography, distribution channel, and [[Definition:Line of business | line of business]]. In personal lines markets such as U.S. auto or homeowners insurance, new business commission rates are often set by the carrier and published in their [[Definition:Agency agreement | agency agreement]] schedules. In commercial and specialty markets — including the [[Definition:Lloyd's of London | Lloyd's]] market — commission rates may be negotiated on a placement-by-placement basis, with new business commission sometimes set higher than the corresponding [[Definition:Renewal commission | renewal rate]] to incentivize intermediaries to bring fresh business. Some [[Definition:Managing general agent (MGA) | MGAs]] and [[Definition:Coverholder | coverholders]] operating under [[Definition:Delegated authority | delegated authority]] arrangements receive a blended commission structure where new and renewal rates are explicitly differentiated in the [[Definition:Binding authority agreement | binding authority agreement]]. In markets like Japan and certain European jurisdictions, regulatory frameworks or industry codes may impose disclosure requirements or caps that affect how new business commission is structured and communicated to [[Definition:Policyholder | policyholders]].

📈 The distinction between new business and renewal commission carries strategic weight for both insurers and distributors. For carriers, offering a higher new business commission is a lever to attract volume from [[Definition:Broker | brokers]] and expand market share, but it increases [[Definition:Acquisition cost | acquisition costs]] and can pressure the [[Definition:Expense ratio | expense ratio]] in the early policy period — a dynamic particularly visible in long-tail lines where [[Definition:Loss development | losses]] take years to mature. For intermediaries, the new business commission often represents the primary financial reward for prospecting and conversion efforts, and its level relative to renewal commission shapes their incentive to focus on growth versus retention. In [[Definition:Delegated authority | delegated authority]] channels, the split between new and renewal commission is closely scrutinized during [[Definition:Audit | audits]] and performance reviews to ensure alignment between the intermediary's production incentives and the underwriter's [[Definition:Profitability | profitability]] expectations. As distribution evolves with [[Definition:Insurtech | insurtech]] platforms and direct-to-consumer models, the traditional commission structures face pressure, but new business commission remains a foundational component of how insurance products reach the market.

'''Related concepts:'''
{{Div col|colwidth=20em}}
* [[Definition:Renewal commission]]
* [[Definition:Acquisition cost]]
* [[Definition:Expense ratio]]
* [[Definition:Commission]]
* [[Definition:Broker remuneration]]
* [[Definition:Binding authority agreement]]
{{Div col end}}

Definition:New business commission - Revision history

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