Registered Insurance Brokers of Ontario (RIBO) Practice Exam

The statement is true. Profit commission is a form of incentive paid by insurers to brokers based on the profitability of the business they produce. It specifically rewards brokers for maintaining a level of claims experience that is favorable to the insurer. This commission is linked not just to the quantity of business a broker generates, but also to the overall performance and profitability of that business.

In the context of the insurance industry, brokers are encouraged to write policies that will not lead to excessive claims. If a broker's book of business results in lower-than-expected claims, the insurer may share some of the profits from those policies with the broker through profit commission. This creates an alignment of interests, motivating brokers to place policies that are likely to be profitable for the insurer.

While profit commission can vary by insurer and the specific terms of an agreement, the fundamental concept remains that it is directly tied to the level of business produced and its consequent profitability. Therefore, the assertion that profit commission is based on the level of business produced accurately reflects its underlying principles in the context of insurance broker practices.