You Eat What You Kill: A Wild Ride through the History of Commissions

I have always been fascinated by the history of the insurance industry—which dates back to ancient Babylon if not earlier, and is interwoven with the rise of global economies and modern trade.

For centuries, the art of selling insurance and the promise of commissions have been driving forces behind insurance commerce, whether it was hawking goods at a medieval market or closing multi-million-dollar insurance deals over a long lunch.

Today, the art of selling insurance blends tradition with innovation, where face-to-face relationships meet digital disruption. Even throughout a global pandemic, insurance has largely remained a handshake business (only now with hand sanitizer!). Let’s take a look through history at how.

Ancient Commissions: When Gladiators Were the “Closers”

Long before sales teams were chasing quarterly quotas, ancient merchants and soldiers were already working on commission. In Rome, merchants received bonuses for hitting targets, and even gladiators had sponsorships—albeit with much higher stakes than your average sales contest (win the fight, or else). These early examples of performance-based rewards set the stage for the commission-driven sales world we know today.

Insurance itself wasn’t far behind. Ancient Babylonians and Chinese merchants were already practicing early forms of risk management, pooling resources to share the burden of losses. If your ship sank or your caravan got raided by bandits, you didn’t exactly get a payout, but you might still have some sheep left. Not quite as comprehensive as your standard property and casualty coverage, but it was a start.

The Original “Door Knockers”: Medieval Peddlers and Traveling Insurance Brokers

By the Middle Ages, the commission-based sales model took a more structured form. Traveling peddlers didn’t just sell spices and trinkets—they were also the first door-to-door salespeople, often working for a cut of whatever they sold. It wasn’t too long before insurance started to catch on in the same way, with brokers roaming Europe to connect people with policies covering everything from shipwrecks to funeral costs.

By the time Lloyd’s of London came into being in 1688, insurance brokers were already earning commissions for matching merchants with underwriters willing to insure their risky voyages. Lloyd’s wasn’t just a coffeehouse; it was the birthplace of the modern insurance broker. When the brokers weren’t busy chugging caffeine, they were hammering out deals, establishing what would become a centuries-long tradition of commission-based compensation in the insurance world.

Colonial America: When Insurance Commissions Hit the Frontier

Insurance sales took a big leap in colonial America. As towns sprang up and people worried about losing everything to fire, piracy, or illness, insurance brokers became essential to managing risks. They weren’t just middlemen; they were trusted advisors (well, as trusted as someone could be in a world without Yelp reviews). These early insurance brokers worked on commission, which incentivized them to drum up business in ways that would seem positively quaint today—think handshakes, handwritten ledgers, and long horseback rides to the nearest town.

The first structured insurance sales models emerged during this time, with commissions based on a percentage of the policy premium. Some agents made a decent living, while others leaned a little too heavily on the "sales" part, paving the way for the stereotypical image of the "slick insurance salesman" who always had one more deal up his sleeve.

19th Century Sales: The Era of Snake Oil and Life Insurance

By the 19th century, insurance agents were peddling life insurance policies the way traveling salesmen hawked snake oil. Working entirely on commission, many agents used high-pressure tactics to close sales. As insurance regulations emerged to curb abuses and scams, the industry began to professionalize. Agents needed training, policies needed standardization, and commissions needed structure.

During this time, life insurance agents earned large commissions in the first year of the policy and smaller renewal commissions in subsequent years. It was a system designed to motivate agents to not only close the deal but also ensure the policyholder didn’t bail out—because there’s no commission if the customer disappears. Talk about keeping your clients close.

The 20th Century Insurance Boom: Fire, Flood, and Real Estate Frenzy

Following World War II, real estate surged, and so did the need for various types of insurance—from fire to liability. Insurance brokers were right there to meet the demand, working closely with homeowners, businesses, and even local governments to provide coverage. The commissions followed suit, with brokers continuing to earn based on premiums, though more sophisticated sales models began to emerge, including bonuses for meeting certain sales quotas or successfully upselling additional policies.

As health insurance gained traction in the latter half of the century, brokers found a new avenue for commissions by selling group benefits plans to employers. These commissions were often based on the number of employees covered or the overall premiums, which meant that landing a large client could be a career-making move. If your job was selling policies to a company with thousands of workers, you were essentially sitting on a commission goldmine.

The Digital Shift: From Paper Policies to Algorithms

With the rise of technology, the way insurance was sold and commissions were calculated began to change. Out went the paper files and rolodexes; in came CRMs, email, and digital insurance marketplaces. Suddenly, it wasn’t about pounding the pavement or cold-calling people from a phone book. Brokers could now manage relationships and track leads in ways that were never before possible.

Commission structures also evolved, with some insurers offering bonuses for renewals and customer retention rather than just new sales. Insurtech startups began experimenting with subscription-based models, "as-a-service" insurance, and hybrid compensation structures. But even in this brave new world, commissions stayed relevant—because nothing quite motivates a broker like seeing that commission check roll in.

The Commission Conundrum: Good, Bad, or Somewhere In-Between?

Today, insurance commissions are a topic of debate. On one hand, commissions incentivize brokers to actively seek out new business and provide excellent service to their clients. On the other hand, some argue that they can create conflicts of interest or encourage overselling. Regulations have stepped in to add transparency and oversight, but the essence remains: if you’re closing deals, you’re making money.

In the realm of health insurance, commission caps and regulatory changes have added complexity to how brokers are compensated, but the principle is still the same. Whether you're earning a flat fee for consulting services or getting a slice of the premium, it's all about bringing in business and keeping clients happy.

Will Commissions Always Be Part of Insurance Sales?

As the insurance industry continues to change, the future of commission-based compensation may evolve, but it's hard to see it disappearing entirely. There will always be something to sell and someone who wants to sell it. For as long as people need coverage and want to manage their risk, the commission will be there as the carrot dangling at the end of the stick.

The commission-based sales model, with all its ups, downs—and occasional ethical gray areas—remains a central piece of the insurance puzzle. It has evolved from ancient incentives and medieval markets to the highly regulated and tech-driven world we navigate today. As long as there are risks to insure, you can bet there will be someone with a pen (or a tablet) in hand, ready to close the deal.

The road from ancient Rome to digital platforms is winding, but one thing is certain: when it comes to selling insurance, there’s always a commission in the mix, and always someone else in the hunt.