Question

19-An agent received $100 commission on an annual policy he sold. But after six months the policy got canceled. What happens to the commission he has already received and spent all of it to buy a cell phone for his agency.

Answer 1

The agent has an obligation to repay the commission to the company.
A broker’s obligation, if any, to refund commissions to an insurer upon cancellation of the property or casualty insurance policy, is governed by the contract between the insurer and the broker. In the absence of an agreement requiring a broker to refund commissions to an insurer upon cancellation of the policy, the broker is not generally required to return any commissions.

  If a policyholder fails to pay the premium or surrenders the policy after one or two years, the agent who sold the policy will have to return the money he earned as commission to the insurer as penalty. This move assumes significance as nearly 85 per cent of the premium income of the life insurance industry comes through the agency channel. Insurers supported this practice, as they feel it will discourage mis-selling of policies.

So if there is an agreement between the company and the broker he need to repay the commission.