Why? Because there are few standards. Every agency has its own structure, which is likely to vary based on the type of insurance sold—a new workers’ comp policy, for example, is likely to pay a different commission than a life insurance policy. State regulations and agency size and profitability can also play a role.
In the end, you may receive commissions based on wildly different numbers that require way too much time to figure out.
In this article, we’ll look at the common types of commissions, the factors that influence them, and the strategies you can use to negotiate favorable higher commissions.
How are Commissions Structured at Insurance Agencies?
Although every agency is unique, several common types of commission payments are used for producers in the insurance industry. Keep in mind that there are two types of agents: captive agents, who work for a single insurer, and independent insurance agents, who may sell policies for a range of carriers.
A captive agent is often paid on a salary basis, but not always. Independent agents, too, may be paid in a variety of ways, including with premium-based commissions.
Upfront and Residual Commissions
An agent may be paid solely based on what they sell. An agent who works on a straight commission receives a percentage of the premium cost of the policies they sell.