How is commission defined in the context of insurance sales?

In the context of insurance sales, commission refers specifically to the earnings that an agent receives from the sale of an insurance product. This amount is typically a percentage of the premium paid by the policyholder and serves as a financial incentive for agents to sell and promote insurance policies.

Understanding that commission is tied directly to the successful sale of a product is critical for anyone in the insurance industry. It reflects the efforts and skills of the agent in helping clients navigate their insurance options, ensuring they find suitable coverage.

The other options reflect different aspects of the insurance business: the overall revenue generated by an agency encompasses total income from all sources, the fee paid to the insurer refers to costs associated with underwriting, and administrative costs involve expenses incurred in managing insurance policies rather than commissions related to sales.