Those commissions, known as contigency commissions, are generally paid to agents who sell auto, homeowners, and business insurance. Contingency commissions are paid based on the number of policyholders in an agent's book of business. Life insurance agents receive commissions that range from 35 to 100 percent of your first-year policy premium. Although your premium may remain the same for the life of your policy, the agent only earns a big commission once. Trips to exotic locales are also standard incentive in the industry.
Captive agents sell policies for one insurance company only.
Allstate Insurance Co., Farmers Insurance Co., Prudential Insurance Co. of America, and State Farm Insurance Co. are companies that employ captive agents, for example. Typically, the insurance company puts pressure on captive agents to push certain policies and meet sales quotas. If the agent doesn't meet the quotas, he or she might be terminated. Independent agents and brokers are pretty much the same, and very different from captive agents. They can sign on with multiple insurers, theoretically enabling them to pick and choose the best deal for you.