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Recently IRDA revised the commission structure payable to Insurance Agents, Corporate Agents, Insurance Brokers, Web Aggregators and Insurance Marketing Firm. Let us see how much your Life Insurance, Health Insurance and Vehicle Insurance Agents Commission is fixed.
These new commission rates will be effective from 1st April, 2017.
Why we must know Insurance Agents Commission?
I know after writing this post, agents fraternity will feel uncomfortable and they may abuse me also. But here my intention is neither to defend their commission structure nor I am against such hefty commission structure.
But being a customer of insurance products, I have every right to know the expenses involved in the product. Insurance Agents Commission is one of such expenses. Hence, I am disclosing this to all of you.
Why we should not share in Insurance Agents Commission?
By knowing the commission of your agents does not mean that you must ask for the share in his earnings. Remember, as per IRDA rule sharing commission or asking for a rebate is illegal. Hence, never allow those agents who are ready to share their commission with you or you must also stay away from such bad practices.
At the end of the day, it is insurance agents earning. Therefore, if you are purely satisfied with the product you are buying, then the agent has every right to earn the commission fully.
Hence, as per IRDA regulation, it is illegal share or ask for the rebate.
As per section 41 of the Insurance Act, “No person shall allow or offer to allow, either directly or indirectly, as an inducement to any person to take out or renew or continue an insurance in respect of any kind of risk relating to lives or property in India, any rebate of the whole or part of the commission payable or any rebate of the premium shown on the policy, nor shall any person taking out OR renewing or continuing a policy accept any rebate, except such rebate as may be allowed in accordance with the published prospectuses or tables of the insurer”.
One more thing you must understand is that insurance contracts are long term (especially life insurance). Hence, the rapport with agents will be helpful for you. If you force for sharing his/her commission, then you may end of in losing the relation with your agent.
Also, if you ask to share his commission with you, then there is a probability of mis-selling to earn more commission. Hence, at the end, you may buy the product which you actually not required.
As in the other profession, in insurance industry also, agents acts as middlemen. Hence, they have all rights to earn the commission which is meant for them. Respect their profession like others. Because during claims, they are the one who will come forward to help you. But for how long the agent will be in the same profession or how professionally he will help is a secondary thing to decide.
You are buying the product by knowing the features and benefits. Therefore, agents also have rights to earn their commission.
However, if he is mis-selling you then you have all rights to report the same to either insurance company or to the regulator. Remember, it is not only MIS-SELLING but an MIS-BUYING from your end also. Because blindly buying products without knowing the benefits and features is nothing but MIS-BUYING. Hence, you are also equally responsible.
To whom these commission structure applicable?
These commissions structure is applicable to below intermediaries.
- Insurance Agents
- Corporate Agents
- Insurance Brokers
- Web Aggregators
- Insurance Marketing Firm
- Any other entity as may be notified by the Authority from time to time.
Corporate Agents, Insurance Brokers and Insurance Agents Commission from 1st April, 2017
In insurance, there are many categories of products. They are like Life Insurance (single and regular premium), Health Insurance, Vehicle Insurance or other than Vehicle Insurance. Hence, I try to separate one by one for your better understanding.
# Single-Premium Products
Below is the commission structure for all single premium products.
You notice that commission is high for single premium term plans than other types of insurance plans.
# Regular Premium Products
In below chart, I will show you the commission structure of Life Insurance Agents Commission for regular premium paying products of endowment type, money back, and term plans.
You notice that highest commission payable is in case of individual term insurance. This is intentionally revised to promote the pure insurance product selling.
# Health Insurance Agents Commission
In below table, I show you the Health Insurance Agents Commission structure.
You notice that for health insurance of group (provided by employer), the commission is lowest.
# General Insurance (Other than Vehicle) Agents Commission
In below table, I listed the General Insurance Agents Commission (other than the vehicle).
# Vehicle Insurance Agents Commission
In below table, I show the commission structure of agents when they sell you vehicle insurance.
How insurance agents commission affect your investment?
Now let us concentrate on Life Insurance products. They are sold usually as an investment. However, they fail to generate the returns of even 7%. Let us not go beyond other expenses which Life Insurance company have to bear. But take an example with considering the life insurance agents commission only and calculate how much returns a life insurance company have to generate to you.
Let us take an example to make you understand my point. Suppose you purchased a typical endowment plan of 15 years, yearly premium is Rs.100. Then as per you the total premium you paid during this whole 15 years is Rs.1500.
If you are expecting the return of 7% from this investment, then at the end of 15th year or at the beginning of 16th year, life insurance company must pay you back Rs.2800. Then only it is meant that your IRR (the way returns are calculated) will be 7%.
However, for life insurance company, the investable amount is less. Because they have to pay to agents (forget about other expenses). Therefore for life insurance company to generate 7% return to YOU, it has to generate more than 7%.
Hence, the front end 7% return expectation from you does not SAME to life insurance company. I tried to explain the same from below illustration.
This is just an illustration of how the expenses are very much important point to consider while investing in any product. Never ignore the expenses the product carry.
Life Insurance products also have some other expenses. If we consider all those expenses, then it’s hard for life insurance companies to generate even 7% return for you from traditional plans.
You may surprise the expenses involved in traditional plans. I already wrote a detailed post on such expenses. You may refer at “Why Endowment or Money Back Life Insurance Policies give less returns?“.
By writing this post, I am neither for or against such hefty commission or expense involved in an insurance industry to middlemen. But I want you to aware about the expenses involved and how they may affect your life insurance (if you purchased as an investment).
Remember one more thing that, online insurance comparison portals also act like agents. They also earn the commission exactly like life insurance agents (if they sell you the product by convincing you).
Hence, never rely on these online insurance comparison portals as if they are unbiased or giving you the BEST recommendation. At the end, they are also in SELLING mode than guiding you.
I wrote about how their business module is structured. Refer the post at “Beware of Insurance Comparison portals in India“.
My intention here is not to harm or degrade any profession. However, being a customer I must aware the expenses involved. Hence, sharing this information.
i have passed IRDA exam and i have taken life insurance and now can i take general insurance with this code
Dear Sir How much star health insurance renewal commission
Dear Ranjith,
Check with Star Health but it is as per above rule.
Sir, I’m an LIC agent, can I take an agency’s of general insurance without appear an exam.
Dear Manoranjan,
Yes, you can but regarding exams, contact the non life insurance companies.
Good info. Thanks. Yes there is nothing wrong in providing such information. People should know what they are paying for. Also, it is not good to ask for commission share. At the same time agents should not act as if they are simply doing a favor. Right knowledge keeps things in the right perspective. Hare Krishna
does an insurance broker earn same as an insurance agent ? can u elaborate on the same thanks
Dear Punit,
I think so.
ON WHAT VALUE IS THE COMMISION OF 15% ON MOTOR VEHICLE CALCULATED?
Dear Anil,
It is on the premium you pay.
Sir Good after noon is a agent commission and Insurance Marketing Firm Commission is same for Non Life and Health Policies
Dear Biswajit,
You mean the online aggregators? If it is aggregators, then it is a different structure.
Sir, I had recently passed national insurance Academy exam direct insurance broker – life & general. Can u explain what is the procedure to empanel with insurance companies directly.
Dear Hari,
Approach the respective Insurance Companies.
Hi sir, I want to knw the difference between unit link policies, traditional and non-traditional policies.
Shravan- I will write you a post on this separately. Please wait.
Dear sir If a life insurance need recived renewal commisssion . How long need they work regular with company
If he work with company 5 years continue he is able to recieved till the policies renewal end term
Life insurance agent commission
Dear Sandeep,
I am not an expert in this regard. Better to be in touch and get the information with the insurance company.
ya sandee[p if an agent gives business for 5yrs and then he quits insurence company pays comission till his polcies renewal
I am an lic agent. Can I have the agency for general insurance.
Arun-Yes, you can have a composite agency.
Hello Sir, If I want to start insurance agency for only cancer risk or only heart and cancer risk, which company is best and how much commission % I get. Thank you.
Achuta-I am not sure about which company best and how much commission they pay you. Please be in touch with the insurance company of your choice.
please tell me calculate agent commission amount which one of these?
total liability premium or total own damage premium
Santhi-It is total of all the premiums you pay to the insurance company.
Hello Basavaraj, For comprehensive policies commission is calculated on Own Damage premium right?
Dear Naveen,
It is on total premium (exclusive of tax).
Kindly tellme ????? type of intermediary get more commission
Mukesh-May I know your question in the more elaborative manner?
Planning to take agency of Bharti Axa … what commission am I going to get ..? According to the blog I will get 35% for 12 year plan but the company representative told me 25% and according to blog 7.5% on premium but representative has told me 5% .
Sachin-Instead of representative, why not you visit personally and discuss with officials?
Sir,
I am under training for tata aig as channel sales manager in health.
I want to how much commisn would i get as CSM,per policy?
And also wants to know, ia surveyor or claim officer is better option to move for??
Or is there any other growth opportunity than going for written exam of surveyor or claim officer?
Please guide me in this regard
Ajay-I am not sure about your relationship with Tata AIG as an employer or an adviser. Hence, better to discuss this with the insurance company directly.
If L. A purchase self (own) life policy
Then what’s criteria of commission
Jadaun-He will get the commission.
Hello Sir,
Please tell me process of became a Insurance & health agent and mutual fund agent?
Ravindra-Knock respective Life and Health Insurance companies for details. Regarding MF, contact AMFI.
Dear sar
How can we start lic corporate agency and how much capital required for it and commission for 15years term police
Please answer me
Thanking you
With best
Santosh-I am not an expert in that. Better to knock LIC branch.
Dear sir,
Thanks for your kind information.I have a truck and I had renewed the insurance of the same this month I.e november 3rd. In earlier insurance the the IMT Endorsement was IMT- 23, IMT-21,IMT-28,IMT-40 and IMT-7. But in renewed insurance the IMT-23 is missing. And I did not notice that mistake made by him. Now on 19th November my truck parts, I.e All 6 tires,battery has stollen. I called to insurance agency to claim the insurance for the same. Now he is telling that IMT- 23 is not mentioned in your insurance and insurance can not be claimed .
So please help me what I have to do . The agent has made the mistake during renewing the insurance.
Regards ,
Girish
Girish-Better to write an email than telephonic conversation. As this will makes you to get a proof from an insurance company.
I want to become United India General Insurance Agent (Vehicle).
I have nearly 200+ commercial trucks under my network so willing to give away insurance issue & renewal services.
Whats the commission structure? & How i can become an agent?
Vaibhav-Commission rates shared above. Regarding the procedure, approach the insurance company with whom you want to associate.
Thank you so much for the valuable information. I have a question. Is there any commission if an anybody starts “Premium Collection / Paying Center” for the convenient of the customers ? If yes, than how much ?
Hitesh-Anyone can’t start such service. Usually, it is provided to LIC retired officials or agents. However, if your premium is already fixed by the insurance company, then you no need to worry about whether they earn commission or what.
Thank you. If I plan to become a LIC & somehow manage to setup Premium Collection / Paying Center than am I eligible for the commission on the premium amount deposited by my center ?
Hitesh-That you have to check with LIC. Because this is out of the purview of this post also.
Hi Sir,
I came across a person who wanted to start his business as independent insurance agent/broker, but using a license registered in his friends name. I hope this is illegal on part of both of them. The licensed person cannot lend his license no. to other person for his business.
Pankaj-Yes, you can complain against such agent either with a concerned insurance company or with IRDA.
sir,
we are owning a car service center.. please guide me to become an insurance agent for cars.
Pavithra-You can approach the general insurance company for the same. They will help you in completing the formalities.
sir ,i want to become a life insurance agent ,please suggest me which company would be better for me in agent perspective?
Sampath-You can try with LIC.
You can go for ISP with any IMF, where you can deal with Life, Health & General; total 6 insurance companies. you have to clear ISP Exam & also you will get a fix compensation of 5,000/- p.m. a part from incentives.
Sampath-Whether it is ISP or anyone. Make sure that how much business you can generate and nothing is free in this world (including their monthly Rs.5,000 fixed compensation). So take a conscious decision.
5,000/- Compensation is prescribe by IRDA which is mandatory to pay. of-course if anybody not do any business continuous 3 – 4 months then why any IMF pay this amount. i am ready to pay after clear the ISP’s exam for at least 2 – 3 months.
Atul-Whatever it is, what I am pointing is let him understand his capacity and which company he is comfortable. Why you and me have to force our opinion on HIM??
Sir can u explain what is ISP and IMF Please.
Sir, I qualify IRDA Exam by Kotak Life Insurance. whether i can do business of non life insurance? if so please guide me.
with regards,
m.s. dahiya
Dahiya-Yes, you can. Check with the insurer with whom you want to associate.
thank u bhasu ji for reply. pl also let me know whether i will again qualify irda exam for non life insurance?
Dahiya-Check with the insurer for a better understanding of the procedure.
Dear Basu,
I have an LIC Endowment Assurance Policy – Limited Payment (T.No. 48),started on 28/12/2002 and maturing in 2022. All Premiums Paid(Total 2 lakh rupees in 5 years) . Last transaction was on 27/06/2008 . Sum assured was 3 lakh and now online it is showing a vested bonus of Rs.198000. I wish to surrender this policy and want to take an online term plan . I am planning to invest balance amount in an equity fund.Is it a wise decision ? How much money can I expect now? OR I should continue till 2022 ? Please advise.
Kumar-Yes, better to go and surrender. Regarding values of surrender, please check with your nearest LIC branch or home branch.
Hi, If you had paid all the premiums then why you want to surrender, unnecessary you have to paid surrender charges. Just take the maturity on time & go through with the Online Term Plan.
Atul-What if he surrender and invests the same? Is the cost be not compensated?
Hi,
I had bought two insurance policy when i was 18 years old, 1 insurance premium was 200 per month and the other was 800 per quarter. Both put together i was keeping aside 500 on an average per month. at that time my salary was 1800 rs
I had taken both the policy for 40 years and agent also told it is good to keep long term policy. i was very happy that i am saving a lot of money for my old age.
I paid for 8 long years and finally realized that the value of money had gone so low that what ever i paid was just numbers and did not add up to my expectations.
Had i used that money to have fun at least i would have had some sweet memories to relish.
My point is don’t use insurance as investment. you can use it as a security that too make it for small amount not big.
Insurance Company is also there to make money, don’t forget that.
Sunil-But Health INSURANCE is pure INSURANCE, not an investment. Currently, the sum insured of those two policies may be meager. But do you feel the same when your salary was Rs.1,800? NO right?? Also, the biggest mistake people do is, they buy insurance and forget to enhance. Insurance buying is not one time process. But you must enhance the cover at least once in 5 years (whether it is Life, Health or other insurance covers).
Sir kindly clear me about the commision paid in motor insurance because i m confused about insentive and commission paid because if commission rate will change then we agent will cant survive in insurance sector its too less because od premium is too less then tp premium
Devender-It is explained in above post. If you still have doubts, then you can check with your insurer.
Dear Basavaraj,
Its unfortunate that you being such highly educated in Financial Services and holding a negative motion against Financial Intermediary ‘s role, let me make it very clear to you that Insurance Companies charge the same premium irrespective you come through a broker/agent or directly buy from them.
I have been in this industry for more than 8 years and i must say customers are much better off if they have brought policy through and agent/broker.
Ral-Great to read your comment. May I know the difference between ONLINE and OFFLINE Term insurance premium? Also, may I know the agent’s average years to stand as an insurance agent in India? Then on what belief one has to buy insurance through an intermediary?
For package policy for motor insurance, the commission rate given is 15%. Pl clarfy whether 15% commission is applicable for the whole premium i.e both own damage and third party. Or is it confined to own damage only.
Lakshmanan-15% is on premium. Whether it is whatever way the insurance company charge you.
Thanks for the article,
I recently bought Apollo Munich Health insurance, through their office in Bangalore, instead of buying online in their website.
I was introduced to a person, whom i asked whether he is an agent or official/staff of Apollo Munich, to which he said, he is an agent working for 5 years in this company (Apollo Munich).
Later during discussion, i spoke about addition amount to be paid to agent, to which he replied, the company pays him the amount and not me. Further he said, he helps in case of claims or any procedure to go through and instead of contacting customer care of the company. Told about his is irda license
Now, did i made a mistake going to an agent, but i went to Company office to buy a plan. Did he fool me saying that company pays the commission and not me through my premiums ?
Thanks
Karthik-From where the company pays the commission to agents? Is it from it’s own pocket? Is the company into social service business? It is definitely deducted from your own paid premium.
Dear Karthik,
You will be charged the same, irrespective of the fact that you bought a policy through an agent or direct purchase.
Insurance companies always absorb agency commission as marketing expense and all policies in the market are pre-designed accordingly
Mr. basu; as per your article, commission rates are going to change but there is no updation on IRDA website. Second, if these rates are changing, is it applicabe to all channel i.e., corporates agents, IMF etc.
Atul-This post is based on IRDA notification ONLY. Check it properly. Yes, the changes are applicable to all channels.
Off course; IRDA notification may be there, but i was looking for any circular from IRDA side for these changes or these Rates. I could’t find it on IRDA website but circular about “Modification in premium rates due to revised Commission/Remuneration Structure” is available on website.
Atul-The one you are referring is latest. Dig deep and you find it. I wrote this post based on that.
Insurance agency is best job in the world. if we take agency there will be no boss for us. flexible working hours. commission also high. many more advantages. to promote agency profession this commission structure
Gopala-Great to know 🙂
Many a times agent’s do not bother post selling the policy but they end up earning yearly commission yearly. I have no of issues that one has come cross i reached out to the PSU(LIC) and private sector company(Tata Aia) they say agent cannot be removed as per irda rules. I do not want the agent to earn comission since they are least bothered post recently selling policy. Recently i got cheated by a broker(blue chip) who sold a MIP plan of a private company(Bharti axa) and mentioned after x years the company will issue bonus which will be added up every year and paid at maturity, I was told the return has been kept at a lower rate which will only increase basis the interest rate scenario prevalent in the country. Recently when the company declared bonus it was in the range of 2.5-3.00% and i felt cheated when i complained to the insurance co about misselling and take action again broker nothing was done and the company is least bothered saying approach ombudsman. As a policy holder over the last couple of years i have been paying sizeable premium month on month.
Amdy-IRDA is agents friendly.
Dear Basavaraj Sir,
is there any way by which we can prevent these AGENTS from getting commissions, after 1st year commission? can we complain to IRDAI regarding agents commissions? can we complain to the insurance company? How can we prevent further c0mmissions to these agents, who escape, after issuing the policy
regards
RAJESH PAI B
Rajesh-You can complain. But as of now there is no such system that you can avoid agents. Either buy DIRECT products (initially itself if insurance company provides such facility) or else continue as usual.
So are you saying nothing can be done and customer is completely at no one’s mercy. As someone who is a financial expert can you think of raising it to anyone. Is their no solution to this problem.
Cheers, Andy
Andy-Am I regulator? No…and do you think regulators are so free? They have to regulate based on BIGGIES comfort.
Dear Basavaraj Sir,
Regarding the commission to these agents, for any policy paying first time commission is ok. Why insurance company need to pay them every year on renewal? because once policy is issued these AGENTS disappear from picture and we only go and pay every year to the insurance company. Does it make sense to pay them every year?
regards
RAJESH PAI B
Rajesh-You have valid points. But insurance companies feel agents ONLY provide service post buying and hence they have all rights to get commission from 2nd year at the cost of buyers money.
Dear sir
In life insurance commission 1st year you have calculated correctly also in 2nd yr too, but subsequent you are calculated with 7.5 it should be with 5%
Regards
Pramod Wankhade
Pramod-It is the MAXIMUM commission insurance agents can get. Hence, it may change. Also, this is not yet implemented. It will be going to implement from 1st April, 2017.
sorry sir, the age of my son is 1 year
i am searching for a health insurance plan for me(30), my wife (30) and my son of age 1 month with si 3 lakh. plz suggest a good policy with no room rent capping and without any co-payment.
Amit-I can’t name any specific one. However, you can check with Apollo, Max, Religare or Star.
Basu, on IRDA site, I didn’t find any policy defined for commissions. If the source of information is based on IRDA, can you please give me the link? I’ve very hard time ‘convincing’ people that such considerable amount of premium is going towards agent commission! They just don’t/can’t believe.
I don’t have any negative impression about commission but I do have negative impression on agents because they don’t put client interests first neither they follow IRDA’s fundamental guideline that “Insurance is the subject matter of solicitation”.
Sreekanth-It is notified on 14th December, 2016. You may find it on IRDA portal. Otherwise, refer the LINK.
Sir, You have taken much pains to enlighten the commission the agents are receiving through various insurance policies. Thanks.
Sankarasubramanian-Pleasure 🙂
How will we save our money when we purchasing insurance plans?
I am also interested in group term plans as a year term.Please suggest good plans term 1 year and sum assured 500000
Guruprasad-Group Term Insurance meant for a group or an organization. Individuals can’t buy such plans. Insurance only for 1 year with Sum Assured Rs.5 lakh? I am unable to understand the logic.
sir good evening , i like to BUY A HEALTH INSURANCE POLICY TO MOTHER , MY MOTHER AGE IS 59 , I REQUEST YOU SIR PLEASE ADVISE ME WHICH HEALTH INSURANCE COMPANY IS PROVIDING A GOOD CLAIM AND GIVING POLICY S UPPER AGES . I REQUEST PLEASE GIVE ME SOME DETAILS AND SOME INFORMATION IN THIS REGARDING . I AM FROM HYDERABAD AND I ALSO REQUEST IF ANY ONE IN HYDERABAD AGENTS DO YOU NOW SIR , INFORM THEM TO CONTACT ME , MY MAIL ID. mjagdishns@gmail.com
thanking you sir,
Jagdish-Refer my earlier post “Best Health Insurance Company in India-Based on IRDA 2014-15 Incurred Ratio“.