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Commission

Commission

Definition

(1) In insurance, a certain percentage of premium produced that is retained as compensation by insurance agents and brokers. Also known as acquisition cost. (2) In reinsurance, the primary insurance company usually pays the reinsurer its proportion of the gross premium it receives on a risk. The reinsurer then allows the company a ceding or direct commission allowance on such gross premium received, large enough to reimburse the company for the commission paid to its agents, plus taxes and its overhead. The amount of such allowance frequently determines profit or loss to the reinsurer.

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