Contingent commissions first appeared in the 1960’s. As insurance companies cut the commissions paid on premiums, they offered an offset as a way for agents to make up for the lost commissions – with strings attached. Agents who met certain goals tied to premium volumes, and the profitability of the book of business, could earn another five to ten percent of premiums – payable early the following year.

For many agencies, contingent commissions account for a significant portion of top-line revenues, while also supporting pre-tax profits and the owner’s compensation.

Examining the data in our IA Valuations database, we found some numbers that were alarming. Overall, 34.3% of the agencies rely on contingent commissions to be profitable. And, while the percentage of dependence varies by revenue size, the story is the same: far too many agencies are running their businesses as though contingent commissions are guaranteed each year.

Some key questions to ask yourself:

Best-in-class agencies work to maximize contingent commissions by leveraging their carrier mix, and by deploying risk reduction programs for insureds. Such programs focus on reducing the frequency and severity of claims, and therefore maximizing the bonuses. Best-in-class agencies do not rely on contingents, but simply view them for what they are: bonuses.

About IA Valuations and Agency Link – Founded in 2017, the IA Valuations team has performed over 200 valuations to independent insurance agencies across the U.S. Our advisors have 25+ years of experience guiding agency owners on maximizing their agency value, planning, and legal needs for ownership transition. In addition, IA Valuations has provided perpetuation planning, financial modeling and business planning for independent insurance agencies. Finally, IA Valuations has advised dozens of agency owners on selling their agencies through our Agency Link process. Agency Link is a platform that connects buyers and sellers together to further the growth and strength of the IA system. To learn more about IA Valuations, please visit or       

The information provided in these documents is general in nature and shall not be construed as personal legal, tax or financial advice for your situation. Please to discuss your personal situation.      

Copyright ©2023 by IA Valuations and Ohio Insurance Agents Association (OIA). All rights reserved. No portion of this document may be reproduced in any manner without the prior written consent of IA Valuations or OIA. In addition, this document may not be posted as a link on any public or private website without the prior written consent of IA Valuations or OIA.       

  By Craig Niess, CVA, MBA

2 Responses

  1. That is a dangerous! I’m surprised at how HIGH the percentage is, my guess would have been 10% or less.

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