Advance commission arrangements are a common feature of the life insurance industry. In order to provide an income stream for agents as they develop and grow their book of business, life insurers frequently agree to provide advances to agents on their future commissions, with the understanding that these advances will be recovered from the future generation of new and renewal commissions.
But what happens when an agent files for personal bankruptcy with a large outstanding advance deficit? What are the rights of the insurance company? The answers to these questions could affect many millions of dollars for insurers; however, based on our experience, bankruptcy trustees may not be particularly familiar with the particular legal precedents applicable here.
This article briefly explains the process and precedents that come into play when an agent with an advance commission arrangement files for bankruptcy.
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