An Analysis of Contingent Commission Use by Property–Liability Insurers

Authors

  • L. Lee Colquitt,

    1. L. Lee Colquitt is the Woodruff Professor of Risk and Insurance, Department of Finance, 303 Lowder Business Building, Auburn University, Auburn University, AL 36849-5245; phone (334) 844-3010; fax (334) 844-4960; e-mail: colquitt@business.auburn.edu. Kathleen A. McCullough is Associate Professor and State Farm Insurance Professor in Risk Management/Insurance, Department of Risk Management/Insurance, Real Estate, & Business Law, 150 RBB Florida State University, Tallahassee, FL 32306-1110; phone (850) 644-8358; fax (850) 644-4077; e-mail: kmccullough@cob.fsu.edu. David W. Sommer is the Charles E. Cheever Chair of Risk Management, Bill Greehey School of Business, St. Mary's University, Alkek 208, San Antonio, TX 78228; phone (210) 431-8055; e-mail: dsommer@stmarytx.edu.
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  • Kathleen A. McCullough,

    1. L. Lee Colquitt is the Woodruff Professor of Risk and Insurance, Department of Finance, 303 Lowder Business Building, Auburn University, Auburn University, AL 36849-5245; phone (334) 844-3010; fax (334) 844-4960; e-mail: colquitt@business.auburn.edu. Kathleen A. McCullough is Associate Professor and State Farm Insurance Professor in Risk Management/Insurance, Department of Risk Management/Insurance, Real Estate, & Business Law, 150 RBB Florida State University, Tallahassee, FL 32306-1110; phone (850) 644-8358; fax (850) 644-4077; e-mail: kmccullough@cob.fsu.edu. David W. Sommer is the Charles E. Cheever Chair of Risk Management, Bill Greehey School of Business, St. Mary's University, Alkek 208, San Antonio, TX 78228; phone (210) 431-8055; e-mail: dsommer@stmarytx.edu.
    Search for more papers by this author
  • David W. Sommer

    1. L. Lee Colquitt is the Woodruff Professor of Risk and Insurance, Department of Finance, 303 Lowder Business Building, Auburn University, Auburn University, AL 36849-5245; phone (334) 844-3010; fax (334) 844-4960; e-mail: colquitt@business.auburn.edu. Kathleen A. McCullough is Associate Professor and State Farm Insurance Professor in Risk Management/Insurance, Department of Risk Management/Insurance, Real Estate, & Business Law, 150 RBB Florida State University, Tallahassee, FL 32306-1110; phone (850) 644-8358; fax (850) 644-4077; e-mail: kmccullough@cob.fsu.edu. David W. Sommer is the Charles E. Cheever Chair of Risk Management, Bill Greehey School of Business, St. Mary's University, Alkek 208, San Antonio, TX 78228; phone (210) 431-8055; e-mail: dsommer@stmarytx.edu.
    Search for more papers by this author

Abstract

The payment of contingent commissions in the property–liability insurance industry has long been commonplace, but recent events have made the practice highly controversial. Even prior to these events, wide variation existed among insurers in their use of contingent commissions. In this article, we examine the determinants of whether or not an insurer chooses to pay contingent commissions at all, as well as the determinants of the extent of their use for those insurers that pay them. We find a number of variables that have a significant relation to the use and extent of use of contingent commissions.

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