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Insurance BrokerProperty and Casualty Insurance

How Does a Property and Casualty Insurance Agent Earn Commission?

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Published On: March 12, 2021

Property and casualty insurance policies help protect your business against damage, financial losses, legal claims, and covered perils. But finding the best coverage means paying a broker or advisor, and many companies wonder how property and casualty insurance agents make commission.

A property and casualty insurance agent makes commission when they purchase or renew insurance on your behalf.

Most standard business insurance policies have property coverage and casualty insurance, which includes general liability coverage and business interruption coverage. Agents and brokers finding such coverage for you earn commissions at the time a sale takes place or upon being assigned your broker of record.

In this post, we discuss the importance of property and casualty insurance, along with how a property and casualty agent makes commission.

How a Property and Casualty Agent Earns Commission

Insurance types in the property and casualty specialty include business liability, commercial automobile, flood, workers compensation, and other coverages. The cost of these business insurance policies depends on the type of business, number of employees, deductibles, and coverage limits.

Regardless of the price, property and casualty insurance agents typically are compensated through a commission based on a percentage of the policy premium.

In most cases, commissions are paid by the insurance company that the employer chooses. It is usually a percentage of the premium for the policy, and may or may not be built into the retention component of the premium cost. This compensation may include base commissions and supplemental (or contingent) commissions. 

Property and casualty insurance agents typically earn between 7% and 20% commission on each policy they sell. The amount varies depending on factors including the type of insurance product, risk classification, whether the policy is new or a renewal, and services provided to your company. Commissions for renewing policies are typically less than the initial commission paid for new business. This renewal may include a persistency percentage based on all of the policies of the broker’s different clients that are in-force with a specific insurance carrier. 

Some brokers are paid solely through commissions for policy purchases and renewals, and some include other fees. Sometimes a fee is charged as they take on consultant (or advisor) roles. Some states have restrictions on these non-commission payments.

As agents and brokers take on more advisory responsibilities, fee-based compensation has become a more common payment method. Usually called a “fee for service agreement,” these fees may be paid by insurance companies or may be directly billed to the client.

As your business grows and changes, you should expect your insurance broker to provide decision support. To earn their payment, brokers and consultants should be involved in your plan several times per year, helping make decisions that complement your overall business objectives.

To avoid unexpected costs, you should know the services and fees upfront, examine your agent or broker’s relationship with insurers, and understand the difference between insurance brokers and insurance agents.

When evaluating insurance brokers, be sure to explore online ratings and benchmarking studies that show who is in your market.

Find a property & casualty insurance broker near you.

Why Is Property Insurance Important to a Business?

Property insurance covers financial losses resulting from damage to your business' physical assets, such as buildings or furniture. It also helps replace other property that is essential for your operations, including machinery or computers.

Depending on the specific limits of your policy, different perils may be covered. Covered perils can include problems such as theft, storms, rioting/looting and equipment malfunctions.

For example, if your business property is damaged or lost by various common incidents, such as fire or theft, property insurance compensates some or all of the related expenses. This extends from your company’s buildings or structures to personal property like office furnishings, materials, inventory and machinery.

Property insurance is important to your business because it protects assets including (but not limited to):

  • Buildings owned by your business

  • Permanently installed equipment on your property

  • Contents within your building, including inventory

  • Outdoor property that is located on the premises

  • Finished and unfinished goods, if you are a manufacturer

  • Machinery that suffers a breakdown, such as boilers, refrigerators or HVAC systems

If you have special property, equipment or goods that would be expensive to replace, do not assume that it is covered by your insurance policy. Speak with your agent or broker to make sure you have the coverage you need before disaster strikes.

Should Companies Buy Casualty Insurance?

Commercial casualty insurance is a broadly used insurance category that mostly comprises liability coverages. It refers to the liability-related pieces of property and casualty insurance. Casualty insurance covers damages and settlements your business might have to pay because of an incident related to your company or property that injured a third party.

Most, if not all, companies should purchase casualty insurance along with property insurance. For this reason, they are often bundled together into a business owner’s policy (BOP) or other umbrella policy. The specific coverages most appropriate for your company depend on how you operate, inherent risks in your industry, and what your employees do day to day.

Here are the most commonly purchased types of commercial casualty insurance:

  • General liability insurance: This casualty insurance protects businesses from claims or lawsuits by customers and other third parties for property damage, bodily injury or personal and advertising injury. Personal and advertising injury includes damage to a person’s or organization’s reputation due to false advertising, slander or libel.

    • Customers may claim your business has harmed them due to defective products, service errors or employee negligence, among other sources. General liability insurance compensates you for these types of claims and other legal defense costs, if you are found liable. It also typically covers medical bills for people injured by your company or on your commercial property.

  • Workers' compensation insurance: This coverage is mandatory for employers in most U.S. states. It pays the required benefits to employees who get injured on the job, including compensation for medical bills and payments for a portion of lost wages. Depending on the states your business operates in, employers must have workers’ compensation insurance when there are more than three to five employees.

  • Commercial auto insurance: This covers potential liability and damage related to your commercial vehicles, such as trucks and vans. If your company’s vehicles are damaged or destroyed, commercial auto insurance coverage covers costs for most of the damages.

There are other types of exposures and coverage solutions. Using an independent agent or broker is one of the best ways to make informed choices about property and casualty insurance. You will not have to spend time to be an expert on each coverage type and insurance carrier, because they can make it easy to understand your options.

A good property and casualty agent will work with you to research coverage, conditions and prices, and can recommend policies that best fit your company’s needs. Working with a professional will lower your opportunity costs and provide you opportunity to run your business.

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Insurance BrokerProperty and Casualty Insurance

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Anthony Waters

Senior Vice President of Strategy and Product, Mployer Advisor

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