What is a commission in the context of insurance brokers or agents?

A commission in the context of insurance brokers or agents refers to the fee that is paid to them for placing insurance business. This fee is generally calculated as a percentage of the premium paid by the policyholder. Commissions serve as a primary source of income for brokers and agents, incentivizing them to effectively match clients with appropriate insurance products.

When agents or brokers successfully facilitate the placement of insurance policies, they earn this commission, which reflects their role in the transaction between the insurer and the insured. It aligns the interests of the agent or broker with those of their clients, motivating them to seek out the best coverage options available.

Understanding the commission structure is essential in the insurance field, as it influences how agents operate and the types of insurance products they may recommend.