Life insurance industry pays Rs. 13,000 crore commission in April-December 2015

The life insurance industry has paid over Rs. 13,000 crore as commissions to their agents and brokers in the first nine months of FY 2015-16, shows (provisional and unaudited) data published by Life Insurance Council, a trade body of the life insurance industry.

The data shows that the industry has disbursed Rs. 13,010 crore in April-December 2015 in the form of commission payouts to their agents. IRDAI data shows that during the same period the industry has received new premium collection of close to Rs. 85,600 crore from 1.66 crore policies.

Considering that the life insurance industry has 20 lakh agents, a rough calculation shows that each agent has earned close to Rs. 65,000 on an average in the first nine months of FY 2015-16.

In FY 2014-15, the life insurance industry paid close to Rs. 19,500 crore as commission to their agents, shows the council’s data.

Typically, many life insurance companies and agents promote traditional policies over ULIPs and term plans as such policies offer lucrative management fees and commissions.

While the first year commission of traditional policies having over 12 years of premium payment term is 40% of annual premium, insurers can pay up to 35% of annual premium on policies having premium paying term of less than 12 years. Currently, insurers who have completed 10 years of operations can pay first year commissions of up to 35% while others can pay up to 40% of annual premium. The insurance regulator has kept the trail commission on such policies at 7.5% from second to fifth year and 5% thereafter.

As on December 2015, the life insurance industry had assets under management of Rs. 24.82 lakh crore. The industry deployed close to Rs. 18 lakh crore in fixed income instruments and Rs. 6 lakh crore in equities, shows Life Insurance Council data.

Commission payouts of the life insurance industry (Provisional and unaudited)

Source: Life Insurance Council