How to Calculate Producer Commissions (Step-by-Step)
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Work out what a producer earns on a sale, from the premium to the paycheck.
The formula
Producer commission = premium × the producer's rate.
Many producer agreements set the rate as a share of the agency's commission, called a split. Then the producer's rate is the carrier's rate × the split.
Example. The carrier pays your agency 12% on a $1,200 auto policy: $144. The producer's split is 30%, so they earn $144 × 30% = $43.20. That is the same as 3.6% of the premium, because 12% × 30% = 3.6%.
Step by step, on one sale
- Start with the premium: a $1,200 auto policy.
- Find the carrier's rate in your contract: 12% on new business.
- Work out the agency's commission: $1,200 × 12% = $144.
- Find the producer's split in their plan: 30% on new auto.
- Work out the producer's commission: $144 × 30% = $43.20.
Example. The same policy renews next year. The carrier pays 10% on renewals, $120, and the producer's renewal split is 20%. The producer earns $24.
A month, with a bonus
Add each sale's commission, then any bonus the month earned.
| Item | Amount |
|---|---|
| Auto: $30,000 of premium × 3.6% | $1,080 |
| Home: $8,000 of premium × 4.5% (15% × 30%) | $360 |
| Bonus for writing 30 policies in the month | $500 |
| Total for the month | $1,940 |
When a policy cancels
A chargeback takes back commission on a policy that ended early. There are two ways to work it out:
- Full: all of the commission comes back.
- Prorated: the producer keeps the part for the days the policy was active. Commission back = commission × (1 − days active ÷ days in the term).
Example. The $43.20 policy was a 6-month policy and cancelled after 30 of its 180 days. Prorated, the producer keeps 30 ÷ 180 of it, $7.20, and $36 comes back.
How Producify works it out
A commission plan in Producify pays a base rate on each product line, either a percent of the premium or a flat amount per policy, and you can add bonuses on top.
The percent is of the issued premium once the policy issues, and of the written premium before that. Pay is worked out for each person from the sales linked to them.
On the Payouts page, Commission Detail lists every sale that pays in this period, grouped by product line, with its premium, rate and what it earned. See How pay works.
Frequently Asked Questions
What's the difference between commission and a bonus?
Commission is a share of each sale's premium. A bonus is an extra amount paid when a target is hit.
Can commissions change year to year?
Yes: carriers change their rates, and agencies change their splits. In Producify, when sales already use a plan, a change to it starts a new version dated today and the old version closes the day before.
How often should I run pay?
Pick a schedule you can keep, and close each period on the same rule every time. See Set your pay period and payouts start date for how a pay period closes in Producify.
Work out your team's pay from your sales
In Producify, Pay Team recalculates every person's pay from their sales each time it opens.
Producify is commission tracking software for independent and captive insurance agencies.
For the payday steps around the math: how to pay insurance producers.
Try your own plan in the free producer commission calculator.