Whenever you thought to invest then first thing you notice is, insurance agents luring you to invest in some insurance plans. One of reason from that may be his high paid commission structure. So it is best you understand it fully before proceeding further.
First let us see the commission structure of agents. This I am updating after the recent IRDA’s (Non-Linked Insurance Products) Regulations 2013. Below is the chart which will explain you the maximum commission structure in detail.
By looking at above table you noticed that if term is more then your agents commission is also more. So now ask yourself why your agent lure you to opt for longer period insurance product rather than shorter. I too believe that insurance is the long term product. But main motive is different than what you think. Even term plan which you take from offline mode also give the same commission structure to your agent. Their may be some minor changes based on product. For example in money back plans agents will receive less commission than normal endowment plans. But overall this is the structure you find for most of the traditional plans.
Here by publishing these rates I am neither against the commission structure nor I am supporting this. But it is your right to know the commission what your agent earn from your investment. I am expecting some agents comment who justifies this commission structure putting reason as the expenses they need to bear. Also I am expecting some comments who are totally against to such a high commission structure.
But I strongly believe that, hiding our main motive to sell (commission) and sharing the commission with clients are two major wrong things. When online term plans started by few insurance companies then few so called IFAs talked too much about the cost advantage of buying directly instead of offline. But I saw the same IFAs not opening their mouth regarding the direct plans of mutual funds. Each product has it’s own positive and negative points. So neglecting them outright from our point is not true. For example, Bank FD may be must not product for the young who is ready to take risk. But same FD may be the major investment product of the same age group guy who is totally risk averse.
Let us now take one example to understand how much an agent can earn.
Term of the plan-20 yrs, Product-Endowment Plan and Yearly Premium-Rs.1,00,000.
Looking at earning you may feel it a lucrative profession. But it is not that much easy as it looks. As I told above, few are also of opinion that commission need to be barred as is with mutual funds. Let me see what will unfold in future 🙂