Jagoinvestor
April 28, 2010
Agents commission in Insurance Policies ?
In this article we will see the commission structure of Insurance Policies . We will look at Endowment/Moneyback/ULIP plans and how much commission an agent earns per year out of those policies.
As per Insurance Act, 1938, The insurance companies are allowed to pay a maximum commission of 40 per cent of the first year’s premium, 7.5 per cent of the second year’s premium and 5 per cent from there on. The commission paid is limited to 2 per cent in case of single premium policies. In case of pension plans, the commission is limited to 7.5 per cent of the first year’s premium and 2 per cent there on. Currently most of the policies are very much paying these kind of commissions . Let us quickly look some of the facts on Life Insurance .
- Average sum assured of the insured Indian is around Rs 90,000
- 1 trillion worth of policies lapsed in 2008-09 , this is mostly because investors have discarded their old policies to buy new one’s , thanks to agents who tell people about another “hot” plan in market. Another reason is that investors buy policies which have higher premium than what they can afford in reality and later feel that its time to stop it .
- India Insurance penetration is around 7.5% of global numbers . i.e: 0.16% of the GDP, which is , against a global average of 2.14
- As per IRDA report 2008-09 , Insurance Industry had 29.37 lakh agents by the end of Mar 2009 , out of which 13 lakh agents were added during 2008-09 .
Life Insurance Commission Example
| Policy Type | Premium Paying Term | Upfront Commission (1st Year) | Trail Commission (2nd & 3rd yr) | Trail Commission (from 4th yr) |
| Endowment / Term Plans | 15+ yrs | 25% – 35% * | 7.5% | 5% |
| Endowment / Term Plans | 10-14 yrs | 20% – 28% * |
7.5% | 5% |
| Endowment / Term Plans | 5-9 yrs | 14% | 5% | 5% |
| Endowment / Term Plans | Single Premium | 2% | 0% | 0% |
| Money Back | 15+ yrs | 15% – 21% * |
10% | 5% |
| ULIPs | Regular Premium |
20 – 40% | 2% | 2% |
| ULIPs | Single premium | 2% | 0% | 0% |
Note : Some of the numbers are in range, which means the commission can lie between that range . Mostly its minimum commission + Bonus if any
Example
- Policy Type : Endowment Policy
- Premium Paying Term : 20 Yrs
- Premium/Year : Rs 1 Lacs
Agents Commission
| Year |
Commission Amount |
Method |
| 1st Year | Rs 35,000 | 1 X 35% |
| 2nd Year | Rs 15,000 | 2 X 7.5% |
| 4-20th Year | Rs 85,000 | 17 X 5% |
| Total | Rs 1.35 Lacs | 6.75% |
Q: So are you imaging which is more costly ? Mutual funds or Insurance Policies ?
Read subramoney’s article on this topic.
How to use this information ?
Agents have to make sure that they follow-up with clients and track the premium payment, this leads to overheads and regular feedback from agents side , apart from that there are operational expenses incurred by agents , so we should not forget those points . As a customer , you should be knowing how much an agent is making out of you , this should form the basis of the quality service for you . An agent should help you understand your Insurance requirement and provide you the best solution , He should assist you in buying the Policy and over the years he should update you/ help you with all the changes .
Hot discussion topic
As per a govt-appointed committee , Insurance commissions should totally be removed by 2011 . “Immediately the upfront commissions embedded in the premium paid (to agents by insurance companies) be cut to no more than 15 per cent of the premium. This should fall to 7 per cent in 2010 and become nil by April 2011”, said the consultation paper prepared by Committee on Investor Awareness and Protection. (Link) .
What do you feel about removing the commissions from Insurance products totally ? Will it impact the Insurance Industry , how much ? Do you think it will lead to fall in premium payments or new policy getting issued ? I personally feel YES . What are your views ?
Thanks for sharing this impressive blog. I am also LIC Agent
Welcome!
hi i m Abhijeet i give one customer to Lic new endowment plan(814/35)=premium 13790/- &lic term plan(823)/35)=14541/-
of sum assured 5000000 policy term -35 yrs, , what will be my commision in 1st year
reply me
It would be around 30% for the first year !
Commission of insurance agents should be reduced and policy should disclose clearly that there must be discount of at least … percent in first premium in the gone days a agents has to convince the customer now it has become essentially instead of convincing the customers.
yes good thought benefit should be given to customer
Thanks for your comment ravish
hi i m sanjeev i give one customer to wealth builder plan in sbi life insurance
of premium-50000/ and policy term -10 yrs, premium paying term-5 yrs, what will be my commision in 1st premium
reply me
sanjeev
9679036628
10%
You need to check your company for this
10.%
Hello Manish,
I wanna take a term plan of HDFC income plus, it would be beneficial or not. Please suggest me
Yes Tarun
It would be good choice. We have a direct association with HDFC for our Jagoinvestor Readers. Let us know if you are interested to buy this policy. We will connect you to our trusted partner for taking this policy.
Just fill up this – http://jagoinvestor.dev.diginnovators.site/solutions/buy-life-insurance-plan
Manish
Manish what about their claim settlement? is it Good?
what ever they promise, they will provide all the benefits or it depends on the market ?
Yes, their claim settlement is amongst the top 3 ! .. Its a good policy !
Tell me this information
NO, IT WILL BE BETTER IF U WILL TAKE SARAL SHIELD TERM PLAN OF SBI LIFE IN WHICH U WILL TAKE RISKCOVER AND UR PREMIUM WEVER AT THE TIME OF MATURITY.
What is commission of agent icici pru elite life 2 policy
Yes
What is commission of agent icici pru elite life 2 policy
Hi sanchit
This is very specific query which you should follow up with the concerned authority only. We wont be able to comment on that
Manish
Can i invest 50000 rs.yrlyfor 10 yes team for my baby’s future planing in hdfc super income plan?
Pls give me a suggestion
You can do that if you want, but I dont suggest it. Rather you should try mutual funds
Hi Sandip
I can see that you are interested in investing in mutual funds. I want to share that now you can invest in mutual funds with Jagoinvestor as your advisor
We create a FREE online account for you, from where you can invest and redeem online.
Our team will be happy to explain you more on this.
Find more at http://www.jagoinvestor.com/solutions/invest-in-mutual-funds
Manish
How to calculate annual premium
The company will tell you
i am looking for an investment come tax benefit plan.. i think ULIP can help with that.. Any suggestions?
Better go with Mutual funds !
Hello Himanshu, Any financial planning needs to be analysed as it depends on multiple factors. What Manish said is correct for most of the investors (Mutual Funds and Term plan combination) but it may need to change based on your age, past, current and future investments.
Good Post Dear
I want to know what is commission of general insurance agent and which general insurance company is best for joining as a agent so please reply with detail.
thanks
Dear Sir,
is State Bank of india smart wealth builder plan better to invest.
please sir tell me about bond fund because they are saying that they will invest my 100% money to bond fund.
11% of compound return. and10 times normal death benefit , 20 times accidental death benefit
Dont go for it . Take normal mutual funds
Why not to buy smart wealth builder
Hi
can you let me know agent commission percentage for Auto Insurance?
I am not aware of that
wht is agents commission under keyman insurance policy
Hi maruty
This is very specific query which you should follow up with the concerned authority only. We wont be able to comment on that
Manish
sir ,i have monthly investment rs3000 and 20 year sbi life saving insurance and how many rs return after 20 year
Hi ramesh
The best answer you can get only from the agent you invested through or just contact the company. The thing is your case is a bit personalised and other than company, no one can give accurate information
Manish
Dear ramesh,
according to IRDA rules and regulations,your amount is invested in governments bonds and debentures so you are getting minimum 2.5 times of your total investment.
Hi , I am Planning to buy ICICI Wealth Builder II & I want to know what will be the commission to ICICI’s Employee as I am not buying it from any agent.
Sir, employee get it as his incentive more than a agent commission as you see , here in ULIP the commission shown as 25% in frist year but actually we get only 6% as agent I am the agent of ICICI Prudential, and we assist you till the end of your policy but when you purchase from Direct Channel it you have to follow for each and every switching in policy its not about commission or incentive of employee its your freedom. Plz feel free to contact me through my email
It would be same commission , as they are the agents in this case (I mean ICICI employee)
Manish
Dear sir,
i want to know about the ulip policy in state bank of india, i need to open 15th years premium term, so give me suggestion to invest 3000/- pm, and you will get after 17 to 18 lacs after maturity of the policy, so i know how much the agent should charge the commission on ulip policy in sbi bank.
ULIP is not suggested
Hi,
Need money back policy detail. if i invest every Rs.1,00,000.00 for 7 years. after 7 years how much i can get. please describe with examples.
This is leason learnt for me.
Thanks
Nagashetty
Which policy ?
Dear sir,
i am agent of life insurance company and i got commission on policy . i want to know that ” is the service tax applicable on commission amount ” ? ( commission amount given by company ) kindly provide the rule /section if applicable.
I am not sure on that
No. U. Not. Have to pay service tax till now as Lic commission is not covered under service tax till date
DEAR SIR,
I HAVE BEEN ADVISOR FOR TATA AIA SINCE 2013. IHAVE TAKEN A POLICY IN AGENTS NAME. BUT I HAVE NPT PAID COMMISION FOR THAT. IHAVE COMPLETED SIX POLICIES INCLUDING MINE. EVEN THEN MY COMMISSIO IS NOT PAID. IS THERE ANY IRDA RULE THAT ADVVISOR/AGENT SHOULD NOT TAKE POLICY ON THEIR OWN? COMMISSION SHOULD NOT BE PAID FOR POLICIES TAKEN ON THE NAME OF AGENT/ADVISOR? IRDA INSISTS/ANYCLAUSE NOT TO PAY COMMISION ON AGENT OWN NAME POLICY FOR THE FIRST YEAR?
L MAHADEVAN ADVSISOR TATA AIA
I am not clear on that .. you should check about this from some other advisors !
There is no. Such kind of rule .. U. should check with tata AIA insurance company for ur commission and check the policy status is it done in ur own code or not
Do agents get trail commission on pension plans. Overtime we accumulate funds in our pension plans, and when we calculate trail commission for them it doesn’t make sense continuing in such plans. Are there ways to prevent trail commission?
If it does not have insurance element , I dont think they get it !