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Professional Indemnity - Broker Commission

Commission Structure

Fixed Percentage Commission

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

Payment Process: 1. Policy sold 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 amount credited to broker account 5. Payment made per settlement terms

Example: - Policy premium: AED 7,350 - Commission rate: 15% - Commission amount: AED 1,102.50 - Credit note issued for AED 1,102.50

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%
6-9 months 90% 90%
9+ 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 or invoiced

Example: - Original premium: AED 7,350 - Commission paid: AED 1,102.50 (15%) - Policy cancelled after 2 months - Short-period rate: 50% retained - Premium refunded: AED 3,675 (50%) - Commission clawback: AED 551.25 (debit note issued) - Broker keeps: AED 551.25

Commission on Endorsements

Additional Premium

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

Example: - Sum insured increased - Additional premium: AED 1,000 - Commission rate: 15% - Additional commission: AED 150 - Credit note issued for AED 150

Return Premium

When endorsement decreases premium: - Commission clawed back on refunded premium - Same commission percentage applied - Debit note issued for clawback amount

Example: - Sum insured decreased - Premium refunded: AED 1,000 - Commission rate: 15% - Commission clawback: AED 150 - Debit note issued for AED 150

No-Premium Endorsements

No commission impact for: - Name changes - Address updates - Administrative corrections

Settlement Process

Regular Settlement

Commission settled based on: - Credit notes - Commission earned on policies sold - Debit notes - Commission clawed back on cancellations/refunds - Net amount - Total credits minus total debits

Statement Period

Broker statements issued: - Weekly, bi-weekly, or monthly - Shows all credit notes (policies sold) - Shows all debit notes (cancellations) - Net balance due to broker

Commission Controls

Fixed Percentage Advantage

  • Same rate for all policies
  • Simple calculation (Premium × %)
  • Consistent and transparent
  • No negotiations needed

Validation

System validates: - Policy is active - Premium collected - Commission correctly calculated - Cancellation clawback uses short-period rates

Next Steps