Do You Know The Kind of Commission, Agents Get from Our Insurance Policy?
Mahesh has been living in your locality for many years now. For you and many of your neighbors, he is more of a friend than just an insurance agent. Of course, he helps you to fill all those long and complicated insurance proposal forms, ensures you don’t have to worry about remembering the dates of renewals, makes the payment process easier for you, and provides overall help about insurance matters. Also, he is the one you rely on the most when it comes to choosing the best plan from so many insurance plans in India. But is he your well-wisher or is he doing all that primarily for himself, keeping his priorities above yours? Commission of Agent on Policy is quite good and if he is selling then he is helping himself.
Let’s see how it all works out.
For years we have been told that insurance is a must and one should buy it not out of a real necessity, but not out of obligations to save tax or just because we have to buy it. These thoughts have been basically put in our minds by insurance agents who tend to gain from our investments. You might say no harm in that as it’s their profession and they should earn for their hard work. True, you are right if you think so, but then you should also get the maximum benefits if you invest in an insurance policy and shouldn’t be short-changed.
As per the Insurance Regulatory and Development Authority of India – IRDAI Guidelines, the insurance agents can earn a maximum of 40% commission in the first year of selling ULIPS. Where non-linked policies are concerned, their commission is accounts for 35% in the first year. However, IRDAI has made certain regulations regarding non-linked policies as well wherein an agent gets more commission if he can get you to commit to a policy for a longer-term. Let’s explain with the help of an example:
| Term | Commission for 1st Year | Commission for 2nd & 3rd Year | Following Years |
|---|---|---|---|
| 5 Years | 15% | 7.5%/5%* | 5% |
| 10 Years | 30% | 7.5%/5%* | 5% |
| 12 Years and More | 33%/30%* | 7.5%/5%* | 5% |
*For brokers, the maximum payable is 30% in the first year of the term of 10 years or more and 5% in the following years. For agents other than brokers, the maximum commission payable is 40% during the first year for the term of 12 years or more.
This was about a particular plan. Now consider an example about commissions for different kinds of plans:
| Policy Type | 1st Year | 2nd & 3 | 4th Year Onwards |
|---|---|---|---|
| Money-Back Plan | 15%-21% | 10% | 5% |
| Endowment Plan | 25%-35% | 7.5% | 5% |
| Single-Premium Plan | 2% | NIL | NIL |
These commissions vary on the basis of the term of the policy and agents try to sell you, an insurance policy with the maximum term for their own benefits irrespective of the fact whether you need it or not.
Now, for example, you have bought an endowment policy from Mahesh for an annual premium of Rs. 1 lakh for a period of 20 years. During the course of the term, he is going to earn as much as Rs. 1,25,000/- as commission from your investment! This is the amount of money that is going only towards his commission and then there will be other charges like fund management charge, policy administration charge, and a few more of those. Therefore the return on investments in such policies is low due to such high costs involved.
Table Content
- Commission of Agent on Policy
- Insurance Agents Commission from 1st April 2017
- Life insurance agent commission for Single-Premium Products:
- Life Insurance Agents Commission for Regular Premium Products:
- Health Insurance Agents Commission:
- General Insurance (Other than Vehicle) Agents Commission:
- Vehicle Insurance Agents Commission:
- LIC Agent Commission Details
- Types of Agent Commission in LIC
- Related posts:
Commission of Agent on Policy
The best way is to eliminate the need for an agent and buy an online policy. The companies offer excellent plans that are simple to understand, easy to compare, and easier to purchase without any hassles. There are websites dedicated to offering you details about every plan in the market on a single platform to make things easier for you. Find out information and then select a plan that charges you a lower premium and ensures that your investment goes towards earning you a healthy return at the lowest possible cost to the company too. It’s a win-win situation for both the insurer and the insured!
Insurance Agents Commission from 1st April 2017
Life insurance agent commission for Single-Premium Products:
| Category | 1st Maximum Commission Payable |
|---|---|
| All Life Insurance Products(except Term Plans) | 2% |
| Term Plans | 7.5% |
| Immediate/Deferred pension or Annuity Plans | 2% |
| 1-year renewable Group Term plan | 5% of the premium paid or Rs. 10 lakhs (whichever is less). |
| Group Term plan | 5% |
Life Insurance Agents Commission for Regular Premium Products:
| Category | 1st-year | Renewal Commission |
|---|---|---|
| Individual Term Insurance | 40% | 10% |
| Individual Non-Term Insurance products | ||
| For 5 Year Policies | 15% | 40% |
| For 6 Year Policies | 18% | 7.5% |
| For 7 Year Policies | 21% | 7.5% |
| For 8 Year Policies | 24% | 7.5% |
| For 9 Year Policies | 27% | 7.5% |
| For 10 Year Policies | 30% | 7.5% |
| For 11 Year Policies | 33% | 7.5% |
| For 12 or more Year Policies | 35% | 7.5% |
| Individual Deferred Annuity/Pension | 7.5% | 2.0% |
Health Insurance Agents Commission:
| Category | Commission |
|---|---|
| Health Individual | 15% |
| Group(Employer-Employee) | 7.5% |
| Health Group(Non-Employer-Employee) | 15% |
| Health Group(Credit linked up to 5 years) | 15% |
General Insurance (Other than Vehicle) Agents Commission:
| Category | Commission to Agents | Commission to Intermediary |
|---|---|---|
| Fire-Retail | 15% | 16.5% |
| Fire-Corporate(Risk SI<=25ooCr) | 10% | 11.5% |
| Fire-Corporate(Risk SI>25ooCr) | 5% | 6.25% |
| Marine-Cargo | 15% | 16.5% |
| Marine-Hull | 10% | 11.5% |
| Miscellaneous-Retail | 15% | 16.5% |
| Miscellaneous-Corporate/Group | 10% | 12.5% |
Vehicle Insurance Agents Commission:
| Category | Commission |
|---|---|
| MOTOR(Comprehensive) | 15% |
| MOTOR(Stand-alone TP) | 2.5% |
LIC Agent Commission Details
| 1st Commission | Depending on the term of the policy and type of the Policy |
| 1st Year Commission | Commission payable on the 1st year premium. |
| Bonus-Commission | Subject to conditions. |
| Renewal Commission | Depend on the type of policy and the Term of the policy. |
Types of Agent Commission in LIC
| YEAR | 1st Type(MONEY BACK) | 2nd Type(ENDOWMENT) |
|---|---|---|
| 1st YEAR | 15% | 25% |
| Bonus Commission | 40% Commission | 40% Commission |
| 2 years | 10% | 7.5% |
| 3rd years | 10% | 7.5% |
| 4th years onwards | 6% | 5% |
Insurance plans in India have been sold by agents for a long time now. It is time for a change. Embrace it and make your money work wonders for you!
