What is renewal commission?
Renewal commission is the smaller percentage paid on premium after the first year, for as long as the policy stays in force and you remain entitled to it. Individually small, it is what turns a book of business into an asset rather than a series of one-off sales.
Renewals are the difference between a job and a business. A producer living on first-year commission starts every month at zero. A producer with ten years of renewals starts every month with income that arrives whether or not they sell anything.
Two things decide whether renewals materialise: persistency, because a lapsed policy pays nothing, and vesting, because unvested renewals stop when you leave. Both are worth more attention than they usually get.
| Policies in force | 300 |
|---|---|
| Average annualized premium | $1,200 |
| Renewal rate | 5% |
| Annual renewal income | $18,000 |
| If 20% lapse | $14,400 |
Illustrative. Renewal rates and durations vary by carrier and product.