Glossary
Contingent Commission
Additional compensation paid by a carrier based on the profitability, growth, or volume of the business an agency placed, calculated after the fact.
Contingent commission — often called profit sharing — depends on how the book performed, typically on loss ratio and volume over a year. It is paid annually or quarterly, well after the underlying policies were written.
It is genuinely hard to reconcile. The calculation depends on carrier data the agency cannot see, arrives as a single lump sum unattached to individual policies, and can swing dramatically year to year. Most agencies verify the inputs they can check — written premium and policy counts — and accept the loss ratio component on trust.
See also
- Base Commission — The standard percentage of premium a carrier pays an agency on a policy, before any contingent, override, or bonus arran…
- Profit Sharing — A carrier bonus paid to an agency when the business it placed performs better than an agreed loss-ratio threshold.
- Override Commission — Extra commission paid above the base rate, often to a general agent, aggregator, or agency principal on business produce…