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Contractors All Risk - Broker Commission

Commission Structure

Fixed Percentage Commission

Commission is paid as a fixed percentage of premium for each policy sold.

Payment Process: 1. Policy issued 2. Premium collected from customer 3. Commission calculated (Premium × Commission %) 4. Credit note issued to broker 5. Commission paid to broker

Commission Payment

When Commission Is Paid

Commission is paid after: - Policy is issued - Premium is collected from customer - Credit note is processed

Credit Note Process

For each policy sold: 1. Policy premium collected 2. Commission calculated (Premium × Fixed %) 3. Credit note generated for commission amount 4. Commission credited to broker account 5. Payment made per settlement terms

Example: - Contract value: AED 2,000,000 - Premium: AED 5,000 - Commission rate: 15% - Commission: AED 750 - Credit note issued for AED 750

Commission on Cancellations

Short-Period Refund Method

When a policy is cancelled, commission is clawed back using short-period rates:

Period Active Premium Retained Commission Retained
Up to 1 month 25% 25%
1-3 months 50% 50%
3-6 months 75% 75%
6+ months 100% 100%

Debit Note Process

For cancelled policies: 1. Cancellation processed 2. Short-period refund calculated 3. Commission clawback calculated (Refund × Commission %) 4. Debit note issued to broker 5. Amount deducted from broker account

Example: - Original premium: AED 5,000 - Commission paid: AED 750 (15%) - Project cancelled after 2 months - Short-period rate: 50% retained - Premium refunded: AED 2,500 - Commission clawback: AED 375 (debit note) - Broker keeps: AED 375

Commission on Endorsements

Additional Premium

When endorsement increases premium: - Additional commission on extra premium - Same commission percentage - Credit note for additional amount

Example: - Contract value increased by AED 500,000 - Additional premium: AED 1,250 - Commission rate: 15% - Additional commission: AED 187.50 - Credit note issued

Return Premium

When endorsement decreases premium: - Commission clawed back on refund - Same commission percentage - Debit note for clawback

Period Extensions

Commission on extension premium: - Calculated on extension premium only - Same percentage applied - Credit note issued

Early Completion

Pro-Rata Refund

If project completes early: - Premium refunded pro-rata - Commission clawed back proportionally - Debit note issued

Example: - Project completes 3 months early - Pro-rata refund: AED 1,250 - Commission clawback: AED 187.50 (15%) - Debit note issued

Settlement Process

Regular Settlement

Commission settled based on: - Credit notes - Policies sold and extensions - Debit notes - Cancellations and refunds - Net amount - Credits minus debits

Statement Period

Broker statements issued: - Weekly, bi-weekly, or monthly - Shows all credit notes - Shows all debit notes - Net balance payable

Commission Controls

Fixed Percentage Advantage

  • Same rate for all CAR policies
  • Simple calculation (Premium × %)
  • Transparent and consistent
  • No per-policy negotiations

Validation

System validates: - Policy is active - Premium collected - Commission correctly calculated - Refund clawbacks use short-period rates

Project-Specific Considerations

Long-Duration Projects

For projects over 12 months: - Commission paid on full premium upfront - Or split by annual installments - Clawback applies if project cancelled

Staged Projects

For multi-phase projects: - Commission per phase - Or on total contract value upfront - Depends on premium collection method

Next Steps