How to calculate renewal commissions
Insurance renewal commissions are generally based on the commissionable premium of policies that renew and the applicable carrier renewal rate. Unlike a simple one-policy calculation, forecasting an entire renewal book requires assumptions about how many policies stay in force, whether premiums change, and how commissions are shared with producers.
Expected renewing policies in year 1 = Current policies × Retention rate
Expected renewing policies in year N = Current policies × Retention rate ^ N
Gross annual renewal commission = Expected renewing policies × Average commissionable premium × Renewal rate
Worked example: 100 policies at 85% retention
Assume 100 active policies, $1,800 average commissionable premium, a 10% renewal commission and 85% annual retention. In year one, the expected renewal count is 85 policies and gross renewal commission is $15,300. In year two, expected policies fall to 72.25 and gross commission is $13,005 if premiums and rates remain unchanged. With a 40% producer split, year-one producer commissions would total $6,120, leaving $9,180 for the agency before expenses.
Retention is not the same as commission rate
A retention rate measures how much of the existing book stays in force from one renewal cycle to the next. A commission rate determines the portion of commissionable premium paid as compensation. Both affect expected revenue, but they represent different business drivers. Improving retention can preserve recurring revenue even if the carrier's commission percentage stays the same.
How premium increases and decreases affect renewals
If the average premium changes each year, projected commission revenue changes even when the policy count and commission rate remain the same. This calculator applies the annual premium change beginning in year two. A positive value models premium growth; a negative value models declining average premiums. Premium growth does not necessarily mean higher agency profit, and actual premium changes vary by account.
What the forecast does not include
This is a simplified projection of an existing book. It does not add new business, distinguish policy types, model different renewal dates, apply carrier-specific contingencies, or account for cancellations after renewal. Expected policy counts may be fractional because the forecast uses averages. Use the results for scenario planning, not as a receivable ledger or guarantee of carrier payment.
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See SplitVerde plans →Frequently asked questions
How do you estimate renewal commission revenue?
Estimate how many policies will renew using an assumed retention rate, multiply by average commissionable premium and the renewal commission rate, and repeat for each year. This model also allows annual premium changes.
Does retention mean the same thing as renewal commission rate?
No. Retention is the proportion of policies that remain in force and renew; the commission rate is the percentage of commissionable premium paid to the agency.
Does this forecast include new business?
No. The forecast follows only the starting book of policies. New policies and acquired books are excluded so the effect of retention is easier to see.
Why are projected policy counts shown with decimals?
A retention forecast uses expected values, not a literal count of issued policies. For example, 85% retention on 10 policies is an expectation of 8.5 renewals across comparable groups, not half a real policy.
Can carrier payments differ from these estimates?
Yes. Billing schedules, cancellations, endorsements, commissionable premium, chargebacks and carrier agreements can all change the amounts and timing of actual payments.