Should You Pay Producers on Renewals? The Real Answer

You feel it in your shoulders before you see it on the P&L. Payroll climbs. New-business revenue stays flat. Your producers make more money than they did three years ago while the agency stands still. The renewal check is the weight pinning you in place.

TL;DR

Paying producers the same commission on renewals as new business is a growth killer hiding in plain sight. MarshBerry data shows that firms with a 15 to 20 percentage point spread between new and renewal rates grow faster, fund stronger service teams, and keep producers ahead on take-home pay.

A 40/40 split is not generous. It is a structural incentive to stop hunting. The fix is not cutting your producers off. It is widening the gap slowly, reinvesting the difference into service staff, and showing every producer exactly how they earn more by selling more, not by coasting on a book they built five years ago.

Why does a flat commission split feel right but work wrong?

It is the most natural instinct in agency ownership. You hired a producer. They built a book. They want to be paid for the ongoing value of that book. And you want to keep them happy because losing a producer with a $400,000 book means watching that renewal stream walk out the door.

The problem is what a 40/40 split actually rewards. When new business and renewals pay the same rate, every hour spent servicing an existing account earns the same as every hour spent chasing a new one.

Servicing is easier. It is less rejection. It does not require cold outreach. So the producer's calendar quietly fills with renewal check-ins and carrier calls while the pipeline dries up.

Your gut has already told you something is off. You see the same five names on the new-business board every month. You feel the drag of an agency that is running in place. That feeling is not burnout. It is math.

What does the data actually say about renewal splits?

MarshBerry's research is direct on this point. Firms that offer identical rates on new and renewal business, a flat 40/40 split, are paying a heavy commission on renewals that should require far less effort from the producer. Those firms are not growing at the same rate as top-performing peers.

The industry average split difference is just 11 to 12 percentage points. But high-growth firms push that gap closer to 15 to 20 percentage points, because the primary strategic objective is generating new business. A producer's job is to produce. That sounds obvious until you look at how many comp plans accidentally pay producers to do the opposite.

Over half of firms do not even tie a producer's renewal rate to a minimum new-business threshold. A producer who writes nothing new keeps the same renewal split as the one who wrote $80,000 in new commission last year. That is not a compensation plan. That is a lease on the agency's future.

The core tension is one Cornell's ILR School captures in its definition of commissions: they represent a percentage of revenue and serve as an incentive for performance. When renewal commissions represent the same percentage as new-business commissions, the incentive to perform new work collapses. Vertafore describes the same dynamic: upfront commissions drive new business, residual commissions reward retention, and every agency has to find its own balance. An agency that tips too far toward residuals is funding a retention machine that starves its own growth engine. That is how a bad commission split kills growth before the owner even sees it happening.

What happens when you cut renewal pay the right way?

The difference between a 40/40 split and a 40/25 split is not a 15-point pay cut. It is a reallocation. A producer with a $300,000 commission book at 40/40 takes home $120,000. At 40/25, the same book pays $97,500 if they write nothing new. But here is the shift: every new account they write at 40% starts rebuilding the gap, and the 15 points you held back funds a dedicated service person who protects the renewals the producer no longer has to touch.

The Big I's Virtual University frames this as a base-and-growth model. The producer gets 25% on their existing book, the base, and 40% on anything above it, the growth layer. The math rewards production without punishing the producer who built the foundation. It also solves the service problem by design. When the agency handles renewals through a service team, the producer's time stays pointed at the only activity that grows the top line: new business.

This is not theory. It is the same business, run better. When you build a producer comp plan that clears $100,000 with a wider split, the producer sees the upside in their own numbers.

The service team handles the renewal cycle. The producer hunts. The agency keeps a wider margin on renewal revenue that funds the service capacity. And the producer's W-2 goes up because they are spending 30 hours a week selling instead of 15.

Why do most owners never fix their commission structure?

The fear is easy to name. You have a producer with a book. You suggest changing their renewal split. They threaten to leave and the book goes with them, leaving a hole in your revenue and a recruiting problem on top of it.

That fear has a price tag. SHRM pegs the cost of replacing an employee at 50% to 200% of their annual salary. A producer making $120,000 costs somewhere between $60,000 and $240,000 to replace. So you should not be cavalier about the risk. But you should also not let the fear freeze you into a structure that guarantees you will never grow past the size of your producer's ambition.

The playbook is procedural, not confrontational. Step one: benchmark your current spread against the 15 to 20 point gap that high-growth firms target. Step two: model the producer's W-2 under the new structure, including a realistic projection of what they earn if they redirect 10 more hours a week to selling.

Step three: phase the change over 24 months, widening the spread 5 to 7 points per year. Step four: show them exactly where the retained renewal dollars go, a dedicated service rep who now handles the work they never wanted to do anyway. This is the same logic behind choosing the right comp structure, draw vs salary.

The producers who leave over a fair, phased, math-backed transition are the ones who already stopped selling. The producers who stay are the ones who see the runway you just built under their feet.

Sources cited in this analysis?

• MarshBerry - Drive Motivation and Growth with The Right Commission Split
• MarshBerry - Rewards and Consequences: Keys to Boosting Producer Productivity
• MarshBerry - The Increased Importance of Producer Compensation Models
• IndependentAgent.com - Producer Compensation: A Base/Growth Model
• Vertafore - Insurance Commission Structures
• SHRM - The Myth of Replaceability

Frequently Asked Questions

What is a typical new vs renewal commission split?

MarshBerry data shows the industry average spread between new and renewal commission rates sits at 11 to 12 percentage points, but high-growth firms push that gap to 15 to 20 points. A common structure is 40% on new business and 25% on renewals, a 15-point spread that keeps the producer's W-2 healthy while funding a dedicated service team.

Can I change renewal commissions on an existing producer?

Yes, but phase the change. MarshBerry recommends widening the spread in 5 to 7 point increments per year over 24 months. Show the producer a forward W-2 model that includes what they earn if they redirect saved service time into new business call volume. The math almost always lands in their favor once they see it on paper.

Does a lower renewal split hurt producer retention?

It can if you spring it on them without warning and no upside model. Handled as a phased transition with a service-reinvestment story and a clear path to higher total earnings, most producers stay. The ones who leave over a fair plan were already riding their book and looking for an exit.

How fast do producers see the upside of a wider split?

Within the first quarter. A producer who redirects 10 hours per week from service to prospecting adds roughly 200 more dials per month. At a 6% contact rate and a 25% quote rate, that compounds into roughly one additional sale per month at the higher new-business commission rate. The math stacks quickly.

What if my producer does all their own service work?

Then the renewal split is solving the wrong problem. A producer doing full-cycle service is running a small agency inside your agency. Hire service staff, pay a base rate on the existing book plus a growth rate on new production, and free them to sell. The debate disappears when the producer stops doing the renewal work.