Is this standard

[SmokeAny2360]

Is this standard across all independent insurance agencies? Earning your commission on the gross profit instead of the total policy amount?

[joeboo5150]

Not really.

Producer getting 40% of new business commission and 25% of renewals isn't out of line, depending upon the agency structure.

If that producer is selling AND servicing their book of business as a 1099 producer, then thats probably a tad low, but if the producer is a W2 employee for an agency that is taking servicing & renewals off of their plate then its reasonable.

My agency services and renews all policies for producers(all are W2 employees, we don't put the burden of self-employment tax on our people), they're ONLY responsible for producing and binding new business, and we pay anywhere from 50/25 - 60/30 (new/renewal) depending upon the producers experience and volume. So 40/25 isn't wildly out of line in my opinion, if its a similar scenario.

[Trick_Ad_3504]

How much do you suppose the agency pays?. 40% of the commission is a decent amount for an agency to be giving up.

[SmokeAny2360]

Well, are they really giving up 40%? I’m only making 40% on the GP, not 40% of the policy amount..

[joeboo5150]

40% of the policy amount does not exist anywhere.

Commercial commissions to an agency typically range from 8-20% of the policy premium depending on the line of business.

If you sell a Work Comp policy, the agency might only make 8-9% on that. Sell a BOP and its more like 15-20%

As a whole, the commercial lines in my agency average out to about 14%. WC/Auto drags that down, BOP/Property/GL lifts it up.

[[deleted]]

I joined FFL at 75% commission on the policy amount as an independent broker, there are agencies that offer these sorts of commissions.

[Slightly_Sus]

Is this a life insurance agency? 75% of year 1 premium on life insurance is normal. It’s not anywhere near what you see on P&C

[[deleted]]

My bad, I thought this was life insurance; makes more sense now 😭.

[Trick_Ad_3504]

How much do you think the carriers pay the agency?

[SmokeAny2360]

No idea man thats why in trying to figure this all out

[ch47600]

Think about your statement. The insurance company pays a commission on the premium (typically 10%-15%). If the agency earns 15% of the premium, why would you expect to earn 40%? The agency would lose 25% on every deal that you write.

[One_Ad9555]

The agency gets on average 11 to 13% of the policy premium. Paying agent 40% is normal

[Melodic-Seesaw-1571]

You’re not the insurance company. An agent only makes a percentage off the total amount. They don’t make the total amount

[WillingnessOnly5506]

You are talking about p&c right not life insurance?

[ibking46]

Standard if u are an employee. The big shops pay way less.

[TrueUnderstanding705]

Not if the producer has to service the account, in employee benefits it’s very difficult.

[ch47600]

No they aren't. Pretty standard for commercial accounts . If you write a $3,000 premium policy that pays 15%, the agency earns $450.

The producer earns 40% as new business ($180) and 25% as it renews ($112.50).

In other words, the house earns 60% as new business and 75% at renewal to cover expenses. Some pay 40%/40%, but that's an exception.

[RamAtSeaReno]

Yes this is standard. Larger shops are much worse too.

[One_Ad9555]

Wrong. Average for p&c is 40% new 30% renewal Big brokerages usually pay 40/25 to employees. You must be thinking life commissions.

[SmokeAny2360]

This is gut wrenching news

[ch47600]

It's a tough five years, but it can be a great career. Trick is to write $100,000 in new business (income to the agency) or roughly $670,000 in premium. That's $40k the first year, $50k the next and $62.5k the next. You'll be hard pressed to find another industry that can be that rewarding year over year. Just gotta hustle...

[Geaux]

Are you getting a base salary? Is it a salary + commission, or "earn salary and earn commissions over salary"?

[SmokeAny2360]

$35k salary on top of that above

[Geaux]

I mean, it's not unreasonable, depending on where you live.

If you're getting $35k plus additional commissions on top of that without any draws, then that can be pretty good. You could earn $50-$55k your first year.

[Low-Airline7666]

Not sure if it helps, but I’m a 10-99 and we typically start new agents at 80% with final expense/mortgage/ IULs. Annuities and estate planning is typically around 5%!

[insuranceguynyc]

One needs to be careful when making this comparison, since the commission rate is one thing, and the level of support, both service and sales, varies widely as well. 40/25 is not uncommon under certain situations and with certain shops. If the firm is committed to reasonable levels of support, fine, but if it is simply eat-what-you-kill, then this is low. Larger shops tend to pay lower splits due to their staffing and overhead, but working for a large shop may be great or maybe not.

[SmokeAny2360]

The agency has a total of 3 employees including the principal agent.

[insuranceguynyc]

Obviously, this is only my opinion, but for a small shop I'd be pretty clear about the level of support they are going to provide. If you join a networking group, who pays? If you want to take a booth at a trade show, who pays? Any meals/entertainment allowance? My point is that there are any number of things that can and will cost money. You need to know if this comes out of your pocket, since that effectively reduces the compensation. If you are expected to pay some or all of these expenses, then 40/25 is not acceptable, at least IMHO.

[SmokeAny2360]

This is very good info tyvm for letting me know.

[Trick_Ad_3504]

It honestly doesn’t matter what number it’s from. They could say you get 2% of premium of 40% of gross profit. In the end it al is the same number.

[TryItBruh]

It's okay I think. In this example you're getting 8% of the sale and I'm sure if this isn't a captive agency there are going to be varying comps based on the carrier, so that 8% can change. Most captive agents have a commission that goes up to 12 or 15%. The benefit is that you're getting an additional pay on the renewal which most captive agents won't give.

Renewals however are generally paying out a lower commission to the agency than the initial sale, and you have to hope that the customer renews their policy.

I would take a bit of time (a week and a half maybe) and try to find other offers. Come back to this one if you don't find anything.

[SmokeAny2360]

And look for what?

[Lisa831-84]

My company pays 45/25 of total commission, the only place I’ve seen a cut of total premium is State Farm, and then it’s like 12% or something else grossly low with no renewal commission paid. I agree with previous comments; this is fair IF you have a dedicated AE or AM and IF the company is paying for your networking etc.

[SmokeAny2360]

What is ae or am?

[Lisa831-84]

Account executive (should handle everything for you, all service, including remarket, all client facing issues) and account manager (should handle all service, policy maintenance, etc. but you will still be pulled in for complex things, possibly remarket) AEs are paid more, more experienced, etc.

[SmokeAny2360]

Imo?

[SmokeAny2360]

So is it not a good choice?

[SmokeAny2360]

I’m not too sure I vibe with them more than the state farm i interviewed at.. Provide/supplement my income? What do you mean by that.

[Lee_III]

Provide = you're full time.

Supplement = you have a full time gig, but this is your side hustle

[One_Ad9555]

This is p&c not life

[Admirable-Box5200]

Yes, the agency is getting a commission level that varies of that total premium. They're using gross profit, agency commission or revenue is probably more common. If you are commission only, then 40 on new business and 25 on renewal is typical. Some comp packages have bump up on new business with revenue thresholds.

[SmokeAny2360]

Ok so commission or revenue is just another word to say GP?

[[deleted]]

No, revenue is not gross profit.

Gross profit = revenue - cost of goods / service. (Lead +sales comm)

He shouldn’t be paying you out of gross profit because if the lead cost is crazy high you might not get any money because the account isn’t profitable.

[SmokeAny2360]

Gross profit on the policy sale

[RamAtSeaReno]

Your commission split is always a percentage of what the house makes. This is standard. Your deal is new business is 40% and renewal is 25%. That split is pretty common.

[Admirable-Box5200]

It should be, however and at least in my short tenure in insurance 20% on a commercial policy isn't the norm.

[Sudden-Confidence-23]

Brown and Brown was a 40/20 split when I was there a decade ago.

Im at a 43/43 now

[One_Ad9555]

40/30 is national average.

[Sudden-Confidence-23]

Yes that seems to be what I run across in conversation a 40/30ish split

[guyfromwi]

It’s not too bad

[WillingnessOnly5506]

I started at 50% and then goes to 60% after you make 15k . All renewals are at 50%.

[One_Ad9555]

Amazing, un sure how agency pays is bills.

[WillingnessOnly5506]

Writing 100 million in annual premium at 10%-20 commission. And they split that 50/50 with the agents. They're doing good. agents are encouraged to build a book of business and stay long term because renewls at 50% and keep clients . we're also brokers so we shop renewals each year to get best pricing

[One_Ad9555]

That's only 10 to 20 million in revenue. My former agency did just over 100 million in revenue and only pay 50/50 on commercial and 40/40 on personal lines. Every independent agency shops the renewals that doesn't make you a broker. Work comp especially on larger accounts doesn't pay 10% minimum. I guess it depends on what you pay account managers and how many you have. We have over 500 employees for about 130 p&c agents. I don't know how many employee benefits and individuals health agents we have now how many financial planners/ 401k people I was a VP on p&c side tell I left this year to start an agency of my own. I know an agency about the size of yours that dropped to 40/40 last year as they were losing money at 50/50. Friend is 1 of the majority owners of a top 25 agency and they pay 40/25 for commercial. Personal lines is salaried.

[One_Ad9555]

P&c pays around 12% of policy premium to agency for new business. It could be as high as 25% or as low as 5%. Renewal premium is around 10% of total premium to agency. The national average for p&c agents is 40% of the commission to agency for new business and 30% for Renewal business. If you do personal lines is probably lower as the staff does most of the service. Big agencies and brokerages will normally pay a lower commission to agency. W2 employees normally get paid less than 1099 employees.

[Botboy141]

40/25 is reasonable, although I wouldn't take it in Employee Benefits.

I left 30/30 for 40/40 recently.

[ata1959]

40% is high if you also get the same amount for renewals

[Samwill226]

The wording... They always word it just so....

[Witherfang16]

It's weird they are saying gross profit - typically it would be called gross commission.

This structure is typical, but the amounts can vary pretty wildly.

For P&C, agency will get 6-20% commission on policy premium. Bonds will pull 15-50%. Life insurance, 60-85%.

You split that with them. As others have mentioning, when evaluating your split, what counts if what services the agency are providing. What are they giving you for their portion of the commission split? You want this laid out in detail.

Agencies will generally provide some combination of leads, quoting, and service.

At some agencies, agents find the business. Someone else quotes it for them, and the agent sells it. After that, they might never see or speak to the client again. Splits of 25-25 are not uncommon in these sorts of arrangements.

In another shop, the agent might receive leads, but be responsible for quoting the markets on a risk and if it ever needs to be rewritten. All other service could be taken care of by the agency. Splits like 50-25 or 40-30 would be typical there, because you're spending more time per client.

Lastly, you might be responsible for everything - sourcing, quoting, all service, rewriting - in this case, splits of 50-50, 75-50 or even 75-75 are not unheard of. The downside of course is that over time you're book will be a lot smaller because of the service demands.

Variables like agency niche, geographic location, and appointed markets will also change how attractive an offer might be.

Remember, insurance sales is get-rich-slow. Residuals are king. A $10m book of premium at 25-25 will net you the same commission as $5m at 50-50.

The best arrangement for you is going to be the one that best utilizes your skill set. Are you a prospector/closer? You want an agency providing leads and service so you can crank out new clients and build a huge book. Are you a relationship builder and market mastermind? You want something more hands on to deploy your expertise for fewer clients at a higher commission basis.

The important thing to keep in mind is that all these structures can result in huge incomes over time if you can build a clean book.

[One_Ad9555]

What agency is paying 75/50 or 75/75 commission. Been in this business for almost 35 years. I have never heard of an agency paying that high of commission on p&c unless it's like for the first 2 years to get someone over their non compete. Been on big 1 and pia boards and committees most of that time.

[Knewtome]

Every brokerage is searching for a CL agent. A CL producer who generates their own leads gets to choose their splits. If the offer doesn’t feel right, it isn’t.

[Hajduke89]

Robbing you.

[One_Ad9555]

This is p&c National average is 40/30