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Insurance Life insurance industry pays out over Rs.20,000 crore commission in FY 2015-16

Life insurance industry pays out over Rs.20,000 crore commission in FY 2015-16

Considering that the life insurance industry has 20 lakh agents, each agent could have earned close to Rs.1 lakh on an average in FY 2015-16.
Team Cafemutual Feb 16, 2017

The life insurance industry has paid out Rs.20,266 crore as commissions to their agents and brokers in FY 2015-16, shows IRDAI annual report.

The total commission expense increased by 4%. The data shows that the industry has disbursed Rs.20,266 crore in 2015-16 as against Rs.19,460 in the preceding year in the form of commission payouts to their agents.  IRDAI data shows that during the same period the industry has received new business premium collection of close to Rs. 1.38 lakhcrore from 2.67 crore policies.

Considering that the life insurance industry has 20 lakh agents, a rough calculation shows that each agent has earned close to Rs.1 lakh on an average.

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.

Going forward, commission expenses of life insurance companies is set to increase further. IRDAI has recently issued a circular on commission of insurance intermediaries in which it has hiked the commission structure of insurance agents under various policies.

The life insurance industry had assets under management of Rs. 25.02 lakh crore in FY 2015-16.

Commission payouts of the life insurance industry 

Period

Commission in Rs. crore

FY 2015-16

20266

FY 2014-15

19441

FY 2013-14

20770

FY 2012-13

18339

FY 2011-12

17848

Source: Life Insurance Council

1 Comment
Kamal Garg · 1 week ago
It is scandalous. Average commission comes to 15% approx. If you pay 15% first time commission and 5 to 7% as trail commission through out the cover tenure, you are paying more to your distributors than what you are adding/giving return to your policy holders. A typical policy would give a return of 5 to 6% to the policy holder. Agreed the life insurance policy covers death risk. But why pay such a hefty and scandalous commission to your distributors. Please understand, second year onwards premium payment becomes the responsibility of the policy holder as otherwise her policy would invalid.
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