Does This Article Apply to Me?

This article is intended for agencies whose producers are compensated based on:

• Overall agency revenue
• Agency profitability
• Monthly or quarterly production goals
• Revenue thresholds
• Bonus or incentive programs
• Compensation that cannot be attributed to individual policies

If your producers earn commissions directly from individual policies, standard commission rules should continue to be used.

Example Bonus Compensation Plan

The following example illustrates a compensation structure that is not tied to individual policy commissions.

Example:

An agency compensates a producer as follows:

• Monthly salary: $3,000
• Bonus eligibility begins after the agency generates $4,000 in monthly agency revenue.
• The producer earns 65% of every dollar above the $4,000 threshold.

Example Calculation

• Total monthly agency revenue: $5,000
• Revenue above threshold: $1,000
• Bonus earned: $650 (65% of $1,000)

In this scenario, the producer's bonus is calculated from the agency's overall production—not from individual policies. Because no single policy generated the $650 payment, there is no accurate way to assign that bonus across policy commission records.

For compensation plans like this, a dedicated bonus tracking policy is typically the recommended approach.

Why a Standard Commission Rule Is Not Recommended

Standard commission rules are designed to calculate commissions earned on individual policies.

If a commission rule is assigned to a producer whose compensation is actually bonus-based, the system may generate:

• Large numbers of unpaid commission records
• Inaccurate commission reports
• Additional reconciliation work
• Confusing commission balances

Since the bonus is calculated independently of policy commissions, assigning a traditional commission rule can create unnecessary accounting records.

Recommended Approach

Instead of using a commission rule, consider the following workflow.

Step 1 – Remove the Commission Rule

If the producer does not earn commissions on individual policies, remove or do not assign a standard commission rule.

Step 2 – Create a Bonus Tracking Policy

Create a dedicated insured and policy used exclusively for tracking bonus or incentive payments.

Examples include:

• Producer Bonus Tracking
• Monthly Incentive Policy
• Bonus Compensation

This policy does not represent actual insurance coverage. It serves as a tracking mechanism for bonus payments.

Step 3 – Calculate the Bonus

At the end of each pay period:

• Run the appropriate production or revenue reports.
• Calculate the producer's earned bonus according to your agency's compensation plan.

Step 4 – Record the Bonus

Enter a single transaction representing the calculated bonus amount using the dedicated bonus tracking policy.

This provides:

• A documented history of bonus payments
• Cleaner commission reporting
• Easier reconciliation
• Accurate financial records

Benefits of This Approach

Using a dedicated bonus tracking policy:

• Prevents unnecessary unpaid commission records
• Keeps commission reports accurate
• Separates policy commissions from bonus compensation
• Creates a clear audit trail
• Simplifies reconciliation and reporting

Best Practices

• Only assign commission rules to producers who earn commissions on individual policies.
• Use a dedicated tracking policy for bonus or incentive compensation.
• Calculate bonuses using agency production or revenue reports.
• Record one bonus transaction per pay period rather than attempting to distribute it across multiple policies.
• Review compensation plans periodically to ensure they align with your commission setup.

Common Questions

Can I assign a bonus payment to individual policies?

Generally, no.

If the bonus is based on overall agency performance rather than individual policy commissions, there is no accurate or equitable way to allocate the payment across policies.

Will this affect commission reporting?

Using a separate bonus tracking policy helps keep commission reports accurate while still providing a documented record of bonus payments.

Can this method be used for other non-policy compensation?

Yes.

Many agencies use similar tracking policies for:

• Employee incentive programs
• Production bonuses
• Revenue-sharing arrangements
• Internal compensation adjustments
• Other payments that are not directly tied to policy commissions

Summary

Momentum AMS is designed to calculate commissions earned on individual policies. When producer compensation is instead based on overall agency performance, production goals, or revenue thresholds, using a standard commission rule can produce inaccurate commission records.

A dedicated bonus tracking policy allows your agency to:

• Keep commission reports accurate
• Maintain a complete history of bonus payments
• Simplify reconciliation
• Separate policy commissions from incentive compensation