(1) In insurance, a certain percentage of premium produced that is retained as compensation by insurance agents and brokers. Also known as acquisition cost. (2) In reinsurance, the primary insurance company usually pays the reinsurer its proportion of the gross premium it receives on a risk. The reinsurer then allows the company a ceding or direct commission allowance on such gross premium received, large enough to reimburse the company for the commission paid to its agents, plus taxes and its overhead. The amount of such allowance frequently determines profit or loss to the reinsurer.
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(i) The remuneration paid to an Agent for the introduction of business, usually in the form of a percentage of the premium. Insurance Agents and brokers are usually compensated by being paid certain percentages calculated on premium they produce. Such an allowance is known as commission. (ii) Commission allowed by the Reinsurer to the Ceding Company on the premium ceded. Besides, covering the original acquisition cost of the Ceding Company, a margin is allowed for acquisition cost of expenses.
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MEDICAL,USA: Amount of money paid to an insurance agent for selling and servicing an insurance policy. Usually a commission is calculated as a percentage of the premium.
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UK: the remuneration paid to an agent or broker for the introduction of business, usually in the form of a percentage of the premium (see also cedant’s commission and contingent commission).