This blog post explains about the new proposal sent to the Insurance Regulator to cut down the existing commissions paid to insurance agents and increase the sum assured for the policy holders. It is just a proposal and it looks Insurance Regulatory & Development Authority (IRDA) is not much interested in the proposal. In this article I will explain about the agents commission structure and why the agents are more important to reach out the customers. Please subscribe to our future articles here.
Commission for Insurance Agents
It is obvious that there should be good income to motivate the agents to get more number of policies. It is true when talking about the insurance agents. They get more commission for their hard work. My humble opinion is they deserve their income because I knew they work hard to get many policy holders. Lets put down few numbers about the commission they are earning to get the policies.
The Insurance Act, 1938, allows insurance companies 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.
As the report points out, for the year from April 1, 2007 to March 31, 2008, the insurance companies paid out a whopping Rs14,704crore as commission.
It is Rs.16.25 for the every Rs.100 . Here the complaint is the high commission for insurance agents leads to low assured value for the policy holder.
Read: Difference between insurance and investments.
Agents deserves the commission
Compare to other countries the awareness and importance of the insurance in India is very low. According to the statistics, more than 90% of the population don’t have the insurance cover for their life. It is not good number for the developing countries like India.
Till now many people are taking the policy because the agents are keen on increasing the convincing the people to take policy which will result in the commission for them. If the IRDA removes the commission, it will be bad day for the insurance sector in India. I hope they could realize the importance of agents.
From the sources, IRDA is in favour of agents, so they will not do anything against the insurance agents. On the other hand, agents must be responsible for providing the correct information to the customers. It is rising number of incidents like cheating the customers and misselling the insurance products which they get more commission. It is very important for the IRDA to regulate and monitor the agents activities. I have explained about the difference between insurance and investments.
Summary
In this article I have explained about the importance of insurance agents and their commission structure. If you are one among them, please share your experience as the insurance agent and post your opinion. It will be helpful to the readers. Thank you for reading the article. If you like this article please subscribe to our future articles here.
October 20, 2009 at 10:27 pm
How much does an LIC insurance agent get ? I am planning to become an insurance agent do you think its worth working parttime as LIC insurance agent
October 21, 2009 at 7:40 pm
Hello Sai,
Yes. It is worth becoming agent for insurance and still most of the people don’t have the insurance. It is not anly about the Life insurance, you also can become insurance agent for Car Insurance, Health Insurance, etc.
If you have any doubts, please reply me.
Thanks,
Krishna
June 26, 2012 at 5:36 am
Hello Sir,
Once complete the IRDA can I become insurance agent for Car Insurance, Health Insurance, etc. or is there any other exam to be completed.
October 21, 2009 at 2:36 am
Hi Krishna
Can any one become an agent, for eg some one working for a pvt company can write the IRDA exam and become an agent, will it be possible. Since i was chased by an agent and requesting me to write the exam to get more contacts…
Regards,
Jay
October 21, 2009 at 7:37 pm
Hello Jay,
Yes. anyone can become the agent if you are clearing the exam. And that also not very difficult. That is why many people are agents.
Thanks,
Krishna
November 24, 2009 at 12:09 pm
How much does an LIC insurance agent get ? I am planning to become an insurance agent do you think its worth working parttime as LIC insurance agent
November 24, 2009 at 5:34 pm
Hello Abhishek,
Yes. It is worth working as the part time insurance agent. If you have good friends and relatives circle, it is easy to get more number of policies. You have to get at least 12 policies per year.
Thanks,
Krishna
November 24, 2009 at 12:14 pm
Is it necessary to have an insurance? when money can be retrieved from bank after death also than why insurance? as they also deduct more comissions for agents?
November 24, 2009 at 5:36 pm
Hello Abhishek,
Every one should have the insurance. It is for protecting their family.
Thanks,
Krishna
November 24, 2009 at 12:15 pm
what are the benefits or added values of insurance that we dont get from banks?
June 10, 2010 at 11:58 pm
I think its ok with the companies to give agents the commission, after all everyone works for money.
but giving 40% is not fair enough.
these high commission lead the agents to mis-sell the products.
i personally saw many agents, giving false claims on returns on various policies in which the entry load is as high as 75-80% of first premium.
to know more about how these agents mis-sell products do visit
http://www.theequitymarkets.com/ulip_agents.htm
Regards
June 11, 2010 at 7:50 am
Hello Nikhil,
Your opinions are correct. It should be regulated with proper rules. There are few good moves by the URDA:
http://www.thinkplaninvest.com/2010/06/disclose-insurance-agents-commissionirda/
Thanks,
Krishna
May 28, 2012 at 8:12 pm
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June 12, 2010 at 11:12 pm
Hi nikhil
i visited the site http://www.theequitymarkets.com/ulip_agents.htm
shocked that agents get this much commissions to sell the products, which in turn leads the customer in losses.
i came to know that why these agents say that ULIP is only for 3 years
oh god i’m shocked
thanks http://www.thinkplaninvest.com for making such great site to discuss
Regards
vyom
October 15, 2010 at 3:30 am
Without insurance agent, can we have insurance policy direct from the companies involved?
If so give details.
This will aslo help people in saving of 40% going to agents.
January 12, 2011 at 2:56 am
Sir,
kindly send latest LIC agent’s commission percentage.
July 10, 2011 at 8:25 am
Iam a nri ordinary technician.
one agent canvased me to take a policy in( xyz) company for pension scheme, it was ulip , yearly premium
100,000/- for 5 years, he said i will get guaranteed return up to 18% , and obiously as it is uilp it may be even more. he said , since he work in the same company and being in FINANCE section , i did not think twice, and took a policy , i thought he is a master in economics , so i will be benefitted,
but when i got the policy in hand , i was shocked to see its contents.
1 year premium -100,000/- , death benefit = 98000/- ( loss of 2000/-), what a benefit!!!!, surrender value =0.
2year premium 100,000/- death benefit = 200,650/- gain of 650/- rs, vow!!!
—- , 5th year premium 100,000/- death benefit , 539300/- gain in 5 years( assuming 6%retun) 39300/- rs . is this 18% so called guaranteed return? , since then i took the policy their so called” nav” running flat, even investers in stok market, and mutual funds gaining , it keeps running flat. because their so called expers invest some where and manages it flat. also they dont respond to queries, once they are on their target . I paid 4 premiums, so far. just want to complete it. my projected pension will be approximately 3800/- rs per moth. for 500,000/-rs capital of mine,( when completed), i thik so . ( who knows), if i had put my money in fds i would have got 9% , and death benefit would have been with interest).
had not the agent lied to me about the 18% guaranteed return , i would not fall a prey to him. now i got the answer why no benefit because they get commisions like 40%????
had i invested some where else would he get that., i dont understand what is the benefit of this policy . , i can only blame myself for lack of knowledge so please be aware — . thank you for information.