1. Introduction
For each product version, you can define some configuration related to sales commission.
Sales Commission (%): the percentage of sales commission over Gross(1)/Net(2) policy premium.
Usually, the percentage of sales commission is provided over Gross premium, because it reflects the money the salesperson earned from the policy.
Option “Should Convert Sales Commission Rate From Based On Gross Premium To Based On Net Premium”: defined percentage in (1) is over Net or Gross Premium.
If the option is unchecked, sales commission amount = Sales Commission (%) * Running Total(3).
If the option is checked, the sales commission amount = Running Total * [Sales Commission (%)/(1-Sales Commission (%)].
Option “Is The Sales Commission Amount At Cost”: defined whether the Sales Commission Amount should be added to the Running Total or not.
If the option is unchecked, the sales commission amount is ADDED to Running Total. This option usually goes with Option “Should Convert Sales Commission Rate From Based On Gross Premium To Based On Net Premium” = checked.
If the option is checked, it means the Sales Commission is already included in the Tariff Calculation. Therefore, the sales commission amount is NOT added to the Running Total. This option usually goes with Option “Should Convert Sales Commission Rate From Based On Gross Premium To Based On Net Premium” = Unchecked.
(1) Gross policy premium: in this context, this term means the premium that already includes all pricing components such as Sales Commission Amount, Underwriting adjustment, Discounts, Tax,…
(2) Net policy premium: in this context, this term means the premium is purely tariff premium, and it does not include other pricing components.
(3) Running Total: there are multiple pricing components such as Tariff premium, Underwriting adjustment, discounts,… Running Total is the value of the premium after applying those components that are placed before the sales commission on the Premium table.
2. Example
1-Should Convert Sales Commission Rate From Based On Gross Premium To Based On Net Premium? is unselected and Is The Sales Commission Amount At Cost? is unselected
| Factor | Amount |
Policy tariff premium | 1.000,00 | |
Underwriting adjustment | 5% | 50 |
Sales discount | 5% | -52,5 |
Sales commission | 5% | 49,88 (5% * (1.000 + 50 - 52,5)) |
Tax | 50 | |
Policy final premium | 1.097,38 |
2-Should Convert Sales Commission Rate From Based On Gross Premium To Based On Net Premium? is selected and Is The Sales Commission Amount At Cost is unselected
| Factor | Amount |
Policy tariff premium | 1.000,00 | |
Underwriting adjustment | 5% | 50 |
Sales discount | 5% | -52,5 |
Sales commission | 5% | 52,5 ((5%/100%-5%) * (1.000 + 50 - 52,5)) |
Tax | 50 | |
Policy final premium | 1.100,00 |
3-Should Convert Sales Commission Rate From Based On Gross Premium To Based On Net Premium is selected and Is The Sales Commission Amount At Cost is selected
| Factor | Amount |
Policy tariff premium | 1.000,00 | |
Underwriting adjustment | 5% | 50 |
Sales discount | 5% | -52,5 |
Tax | 50 | |
Policy final premium (the premium that a customer will pay) | 1.047,50 | |
Sales commission at-cost (apply on the net premium) | 5% | 50 (5% of 1.000) |
4-Should Convert Sales Commission Rate From Based On Gross Premium To Based On Net Premium be unselected and Is The Sales Commission Amount At Cost is selected
| Factor | Amount |
Policy tariff premium | 1.000,00 | |
Underwriting adjustment | 5% | 50 |
Sales discount | 5% | -52,5 |
Tax | 50 | |
Policy final premium (the premium that a customer will pay) | 1.047,50 | |
Sales commission at-cost (apply on the gross premium EXCLUDE tax) | 5% | 49,88 (5% of 1.047,5 - 50) |