The growth contingent is based upon a relationship between:

Question

Options

• Anet investment and premium volume
• Bcommissions and net income volume
• Closs and adjustment volume
• Dprofit and premium volume

• A
  6% (1)
• B
  13% (2)
• C
  6% (1)
• D
  75% (12)

Explanation

Option D is correct because a growth contingent is a type of contingent commission paid to producers (agents/brokers) for growing their book of business (premium volume) - but only when that growth is profitable for the insurer. The contingent rewards volume expansion while conditioning the payout on acceptable profit performance, making both elements inseparable from the formula.

Why the distractors are wrong:

• A (net investment & premium volume): Investment income is an insurer's financial metric, not a driver of producer contingent arrangements.
• B (commissions & net income volume): Commissions are the output of contingent programs, not the basis for calculating them - this confuses cause and effect.
• C (loss & adjustment volume): Loss and loss adjustment expense relate to loss ratio calculations, not the growth contingent specifically (that's more relevant to a profitability or loss ratio contingent).

Memory tip: Think "Grow + Go Green" - the growth contingent requires you to grow the premium, and the insurer must go green (be profitable) on that growth. No profit, no contingent payout.

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