Glossary
Profit Sharing
A carrier bonus paid to an agency when the business it placed performs better than an agreed loss-ratio threshold.
Profit sharing rewards underwriting selection: place business that does not generate outsized claims and the carrier returns some of the benefit. Agreements set a loss-ratio target, a qualifying volume, and a payout scale.
Because payouts hinge on claims that may take years to develop, profit sharing is the least predictable line in agency revenue. Agencies that budget for it as though it were recurring are exposed to a bad claims year they cannot control or forecast.
See also
- Contingent Commission — Additional compensation paid by a carrier based on the profitability, growth, or volume of the business an agency placed…
- Base Commission — The standard percentage of premium a carrier pays an agency on a policy, before any contingent, override, or bonus arran…
- Loss Run — A carrier-issued report of an insured's claims history over a stated period, used in underwriting and renewal marketing.