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Insurance Agency Commission Structures & Compensation Plans


Starting an insurance agency can be a daunting task. But, with the right planning and preparation, you can ensure your agency is set up for success. One of the most important aspects of any insurance agency is its commission structure and compensation plan. 

This article will help entrepreneurs understand the different types of commission structures and compensation plans, so you can choose the one that best suits your needs. 

Also, motivators for your insurance agents will be discussed so you can strategize their results. Finally, some tips for starting an insurance agency from the ground up are included.


3 Common Insurance Agency Commission Structures

There are three common types of insurance agency commission structures:

  • Producer Commission Structure

The producer commission structure is the most common type of commission structure in the insurance industry. Under this type of arrangement, insurance agents are paid a commission for every policy they sell. The commission is usually a percentage of the premium, and it can vary, depending on the type of policy and the insurance company.

  • Agency Commission Structure

Under an agency commission structure, the insurance agency itself receives a commission from the insurance company for every policy sold. The agency then distributes the commission among its employees based on a predetermined formula.

  • Flat-Fee Structure

Under a flat-fee structure, insurance agencies charge a fixed fee for their services, regardless of how many policies are sold. This type of arrangement is less common in the insurance industry; however, it can be beneficial for agencies that have a high volume of sales.


3 Insurance Producer Compensation Plans

Insurance producer compensation plans are designed to incentivize insurance agents to sell policies: 

  • The most common type of incentive is a commission.
  • Some insurance companies offer bonuses for selling certain types of policies
  • Some insurance companies pay incentives for achieving certain sales goals.


3 Common Pitfalls in an Insurance Agent Compensation Plan

There are 3 common pitfalls that entrepreneurs should avoid when designing an insurance agent compensation plan: 

  • It’s important to make sure that the incentive structure is simple and easy to understand. 

If the incentive structure is complicated, agents may be confused about how they will be compensated, which can lead to frustration and low morale. 

  • The incentives should be aligned with the company’s goals. 

For example, if the goal is to increase sales of a particular type of policy, then the incentives should be focused on selling that type of policy. 

  • It’s important to avoid creating too many tiers in the compensation plan. 

This can make it difficult for agents to progress and can lead to resentment among those who are not able to reach the top tier.


3 Tips for Ensuring Your Insurance Agency Employees Are Paid Fairly

There are a few things you can do to make sure your insurance agency employees are paid fairly:

  • It’s important to conduct regular performance reviews so you can identify any areas where agents may be falling short. 
  • Establish clear expectations for agent performance and keep track of results so you can identify agents who are struggling. 
  • Create a system for rewarding agents who meet or exceed their sales goals. This could include bonus commissions, gift cards, or other types of prizes.


3 Tips to Starting an Insurance Agency from Scratch

If you’re thinking of starting an insurance agency from scratch, there are a few things you need to do to get started. 

  • You’ll need to obtain a license from your state’s insurance department. 
  • You’ll need to find an insurance carrier with whom to partner. 
  • You’ll need to create a business plan and marketing strategy. 

For more information on starting an insurance agency, check out our Ultimate Guide to Starting an Insurance Agency.



There are a few different types of commission and compensation structures for insurance agencies. The most common type is the producer commission structure, where agents are paid a commission for every policy they sell.Other types of compensation plans include the flat-fee structure and the incentive-based compensation plan. 

It’s important to choose a compensation plan that incentivizes agents to sell policies that align with the company’s goals. You should also ensure that the incentive structure is simple and easy to understand so that agents aren’t confused about how they will be compensated. 

Finally, you should establish clear expectations for agent performance and keep track of results to ensure everyone is being paid fairly. With these commission structures firmly in place, your plans for results, agent motivation, and company growth will be achieved in no time.