Back in the 1960s, the insurance business was...cutthroat. It was the Mad Men era, after all, and the economy was facing a slew of challenges. At the time, insurance claims were jumping faster than inflation.
So companies just cut their agents’ commissions.
To ensure that the agents didn’t burn the building down, they started offering their agents performance bonuses. These “contingent commissions” would provide the agents with a percentage of the premiums if they met sales quotas and profitability milestones.
Think of it this way: they incentivize their agents to go out and sell insurance to people who don’t need it or won’t use it. Maybe they’re young people whom the agents convince they could die at any minute, or it’s a super conservative business person who is hyper-paranoid about a hurricane destroying his business...in the middle of Nebraska.
This would be funny if it were actually a joke.
The point is that agents are paid on a basis of how profitable a customer is to their business. The less insurance that a client uses, the more profitable those policy holders are to the company.
As a result, the agents receive a small cut of those premiums.
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Finance: What is Contingent Liability?4 Views
Finance allah shmoop what is contingent liability All right you
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a promise you've made that you need to fulfill teo
pay someone and fulfilling it can be done with cash
or ah promise of delivering inventory or after you've sold
the home to the joneses An interesting family with oddly
large foreheads you know delivering good title to the home
to them right So you're fulfilling liability of producing your
home so what's a contingent liability Well think of it
is a call option or a put option on a
security A contingent liability is a derivative of some other
underlying being like another liability Well the most common contingent
liability would be a filed lawsuit that is more than
just an ambulance chasing securities lawyer hoping to get a
quick five hundred grand to go away google might be
willing to pay three billion dollars toe by ring That
wireless doorbell company started by some weirdo contingent upon ring
properly defending its lawsuit from honeywell which claims that they
own the patents on the process while the financial outcome
of that lawsuit is a contingent liability to the company
Ring and the outcome of the joneses moving into town
well is a worldwide dominance and the enslavement of all
human I mean that's what's at stake their people But 00:01:31.39 --> [endTime] not least they keep their front lawn looking nice
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