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| Insurance commission and rates |
This is what we will be learning today. It is important question people who want to work as insurance agents usually ask before they go into the job. As a financial advisor in FBN Insurance, I will help you explain some things on life insurance commission. It will help you understand the job better. So feel free to ask your question in the comment section if you need more explanation after reading this article.
Note: there is not exact amount of money all insurance agents earn as commission. Commission earn by insurance agents vary. A life insurance agent's commission depends on a few factors, including the company's commission plan and how much life insurance the agent is selling (MILA ARAUJO 2019).
Some people like commission job while some others will tell you I cannot do it. No matter the choice of the individuals, the truth is that working as an insurance agent who earns commission on monthly basis is not bad if you know what you are doing in the company. The length at which you are likely to grow and earn good commission is dependent on some factors. The way you handle and act towards these factors determines whether you earn better in terms of commission or not.
Also, it is important to know that some fulltime insurance companies have fixed allowance or salary they receive every month outside their commission. Whether they receive salaries outside their commission is dependent on the model of payment of the insurance company in question. But know that for the allowance to be complete in any month, there are minimum number of policies and premiums each agent is to meet up with in each month.
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| Having product knowledge on commission |
Commission Rate of Life Insurance Companies and Policies
Different companies have different commission rates. The commission rate of company A may not be the same with that of Company B. That is how insurance companies work. The company that offer higher commission rate have their reasons for doing that. There may be competitions among the finance companies.If there is competition between New York Life Insurance Company and AAA Life insurance, any of the two may increase the commission rate on life insurance products they sell. This can motivate the agents and make them work harder. Action like this make agents passionate to sell more insurance services.
AAA (American Automobile Association) life Insurance Company is an American life insurance company that offers term, whole and universal life insurance. Also, New York Life Insurance covers similar services including annuity. New York life insurance began its operation since 1854 and it is largest mutual life insurance company in the United States and is ranked #69 on the 2018 Fortune 500 list of the largest United States corporations by total revenue.
Insurance policies sold by life insurance companies have different commission rates given by individual companies. Long term investment or endowment policies have higher rates than short term. For example, 10% of premium paid by any policyholder that registered for Flexi Edu plan in FBN Life Insurance goes to the agent if the customer signed up for only five years duration which is the minimum years of the policy. And the one year policy (Easy Save Policy) of the same company has 1.5% of the premiums paid go to the agent as commission.
Factors that Affect the Commission of an Insurance Agent
There are a number of factors that can affect the commission of a life insurance agent in any insurance company. These factors are as follow:- Agents attitude toward the job
- The type of life insurance product sold
- Consistency of premium payments by customers
- The duration of policies sold
- The environment
- Number of agents clients base
- Company's Reputation
Agents Attitude toward the Job
Attitude is important in choosing any carrier in ones life. The attitude you have towards a particular job goes a long way to determine whether you will succeed in that job or not. The same applies when it comes to insurance job that is mainly based on commission. Though some life insurance companies still pay allowance on monthly basis but the main earning is on commission.
Some agents get insurance agency job and in the long run begin to have cold feet about the company. They sometimes loose focus and begin to see the job as something that is not worth doing. This is usually due to the low commission earning at the beginning of the job. Some agents morale begin to go low.
An insurance agent that is not motivated finds it difficult to do well in the job. Such agent sometimes doubt the job he does. He finds it difficult to market to prospects to grow his or her customers base and make money. When agents have negative attitude towards the insurance agency job they do, they will not earn good commission.
Life insurance products varies. When a customer signs up for endowment product in any life insurance company for instance, out of the premium paid, some part of the money is allocated as risk premium. Example, if the customer pays $5,000 as monthly premium, $333 can be allocated as a risk premium and the other balance invested. This kind of product can be considered as low risk product in endowment plan category. The product can have minimum duration of five years. The agent that sales this kind of product may earn less commission when the customer pays premium because the risk premium is low. The commission rate of the product can be just 5% of the premium ($5,000) paid every month. That is to say that for that $5,000, the agent earns $250 in the first year.
But if an agent for example sells a policy which has higher risk premium, he earns higher commission. He can sell another kind of endowment premium that has risk premium of $666 if the customers pays premium of $5000 every month. If the product has minimum duration of five years, the agent can earn commission of $500 on the commission rate of 10%. These are different kinds of endowment policies with different commission rates. So, if you want to earn good commission as a life insurance insurance agent, sell insurance services with high risk premium, term insurance policies, and annuity products.
If an agent has large customers base, his or her earnings are likely to increase. That is how insurance works. Even if some customers stop paying premiums, the agent may not feel it much because others will pay and he or she earns commission. Any agent that has large customers line that pays their premiums as of when due smiles when commission is paid.
In FBN Insurance, you can earn up to 15% of premiums paid by your customers as renewals in the first year. That is why it is important for salespersons to have good relationship with their customers. When you build good relationship with them, you can always convince them to come and make their renewal payments. The more renewals they pay, the more money you earn as commission.
The joy of working as an insurance agent in any life insurance company is to see your commission grow on monthly basis. Activation of automatic debit from customers bank accounts can go a long way in making sure that customers pay their renewals every month. Agents can earn commission on a particular long term policy for up to four years.
Most times, life insurance agents convince their prospects to go into long duration policies. They have their reasons for doing that. And the main reason is because they know they will earn more as commission by selling such plans.
That is why agents in cities earn better than people that live in rural areas. When people carry out their businesses in good economy cities, they can easily sign up for insurance contract. The more people that register under a particular agent, the more money the agent makes as commission.
The brand name of the company in that regard is sound. This is one thing prospecting agents should consider before accepting any job from any life insurance company. Agents that work with insurance companies that have good brand names earn better.
Some agents get insurance agency job and in the long run begin to have cold feet about the company. They sometimes loose focus and begin to see the job as something that is not worth doing. This is usually due to the low commission earning at the beginning of the job. Some agents morale begin to go low.
An insurance agent that is not motivated finds it difficult to do well in the job. Such agent sometimes doubt the job he does. He finds it difficult to market to prospects to grow his or her customers base and make money. When agents have negative attitude towards the insurance agency job they do, they will not earn good commission.
The Type of Life Insurance Sold
It is another way to determine how much commission and insurance agent can earn on monthly basis. The kind of life insurance policies an agent sells in a month depends on how much commission he will earn on those products. An insurance agent can earn $11, 000 in a month as commission having a particular number of policies sold. Also, another agent can have the same number of policies sold to different customers but earn approximately $2,000 from those policies as commission.Life insurance products varies. When a customer signs up for endowment product in any life insurance company for instance, out of the premium paid, some part of the money is allocated as risk premium. Example, if the customer pays $5,000 as monthly premium, $333 can be allocated as a risk premium and the other balance invested. This kind of product can be considered as low risk product in endowment plan category. The product can have minimum duration of five years. The agent that sales this kind of product may earn less commission when the customer pays premium because the risk premium is low. The commission rate of the product can be just 5% of the premium ($5,000) paid every month. That is to say that for that $5,000, the agent earns $250 in the first year.
But if an agent for example sells a policy which has higher risk premium, he earns higher commission. He can sell another kind of endowment premium that has risk premium of $666 if the customers pays premium of $5000 every month. If the product has minimum duration of five years, the agent can earn commission of $500 on the commission rate of 10%. These are different kinds of endowment policies with different commission rates. So, if you want to earn good commission as a life insurance insurance agent, sell insurance services with high risk premium, term insurance policies, and annuity products.
Number of Agents Customers Base
This factor does not just affect how much commission an agent will earn but it is also used to rank agents. Any agent that has high number of customers in his base is usually promoted by insurance company. It is a good sign that the employee is working and he is bringing money into the company. This is a vital promotional tool in insurance companies.If an agent has large customers base, his or her earnings are likely to increase. That is how insurance works. Even if some customers stop paying premiums, the agent may not feel it much because others will pay and he or she earns commission. Any agent that has large customers line that pays their premiums as of when due smiles when commission is paid.
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| Insurance agents commission; Source: US Insurance Agents |
Consistency in premium Payment
Consistency in premium payment is another factor that determines how much a salesman can earn as commission. Commissions for life and health insurance brokers tend to be between 40-100% of the first year premium, then 1-2% for renewals (US Insurance Agents 2015). The point derived from the post of US Insurance Agents is that renewals still count in earning money as commission. Though the company quoted 1-2% as commission rate earned from renewals but many companies pay more than that in renewal to insurance agents.In FBN Insurance, you can earn up to 15% of premiums paid by your customers as renewals in the first year. That is why it is important for salespersons to have good relationship with their customers. When you build good relationship with them, you can always convince them to come and make their renewal payments. The more renewals they pay, the more money you earn as commission.
The joy of working as an insurance agent in any life insurance company is to see your commission grow on monthly basis. Activation of automatic debit from customers bank accounts can go a long way in making sure that customers pay their renewals every month. Agents can earn commission on a particular long term policy for up to four years.
The Duration of Policies sold
Another factor that determines how much a life insurance agent can earn as commission is the duration of the policy sold by the agent. If an agent sells long duration policies, he will earn more in commission than someone that sells mostly short term policies. Long term policies have higher percentage than short terms.Most times, life insurance agents convince their prospects to go into long duration policies. They have their reasons for doing that. And the main reason is because they know they will earn more as commission by selling such plans.
The Environment
Environment has ways of affecting earnings of life insurance agents. Over the years, experience has shown that agents that live in cities where there is buoyant economic activities earn higher than those that live in places that have poor economic activities. According to Mr Precious, Benin Area Sales Manager of FBN Insurance, Nigeria, insurance services is not for poor people. So, for one to enter into any insurance policy, he needs to have money to pay premium as of when due.That is why agents in cities earn better than people that live in rural areas. When people carry out their businesses in good economy cities, they can easily sign up for insurance contract. The more people that register under a particular agent, the more money the agent makes as commission.
Company's Reputation
Is the insurance company know to pay claim when the unknown happen? Do they pay without stressing the beneficiary of the life assured? If the insurance company pays without stress when the unexpected happen, then they are building good reputation. They will sell more products to people and their agents will be happy because the company has good reputation.The brand name of the company in that regard is sound. This is one thing prospecting agents should consider before accepting any job from any life insurance company. Agents that work with insurance companies that have good brand names earn better.
References
- MILA ARAUJO (2019), How Much Commission Does My Agent Make From My Life Insurance Purchase?, published by The Balance, New York, United State, retrieved October 26, 2019,
- NerdWallet (2019), AAA Life Insurance Review 2019, California, United States, retrieved October 26, 2019
- US Insurance Agents (2015), How Much Do Insurance Agents Make, published by US Insurance Agents, United States, retrieved October 26, 2019
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