What type of compensation may a broker receive for profitable business placement?

A contingent commission is a form of compensation that a broker receives based on the performance of the business they place, which typically involves the profitability of the insurance policies issued or renewed. This type of commission is contingent upon certain conditions being met, such as underwriting profitability or volume benchmarks.

In the context of the insurance industry, this incentive aligns the interests of the broker and the insurer, encouraging the broker to place business that not only generates revenue but is also sustainable and beneficial over time. This ensures that the broker is motivated to maintain a long-term relationship with both clients and insurers.

Other types of compensation such as performance bonuses or administrative expenses do not specifically relate to the profitability of the business placements. Client referral fees also represent different compensation structures that do not hinge on the performance of the business in the same way contingent commissions do.