Insurance Life insurers pay 5% of the total premium as commission in FY 2023

Life insurers pay 5% of the total premium as commission in FY 2023

The life insurance industry has paid gross commission of Rs.42,000 crore in FY 2023.

Nishant Patnaik Jul 12, 2023

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Many believe that life insurance agents and intermediaries earn commission in at least two digits. However, an analysis of commission income paid by insurance companies with respect to the total premium (new business premium + renewal premium) done by Cafemutual shows that insurance agents and intermediaries earn single digit commission.

The analysis shows that agents and intermediaries earn gross commission of 5% of the total premium in FY 2023.

Of the total premium collection of Rs.7.75 lakh crore received by life insurance, insurance companies paid gross commission of Rs.42,150 crore to agents/intermediaries in FY 2022-23. Please note that gross commission is subject to taxes like GST and income tax.

This is due to lower commission on single premium policies and renewal premium. While life insurance agents get 2% commission on single premium policies, they get 3-5% commission on renewal premium.

In FY 2021-22, life insurers paid gross commission of Rs.36,000 crore, which was also 5% of the total premium received.

Interestingly, while the gross commission income of agents and intermediaries increased over the four financial years in absolute terms, the percentage of gross commission to the total life premium did not change in the corresponding period. During all these years, it remained 5% of the total premium received by life insurers. Let us look at this table to know more:

Financial year	Gross commission paid by life insurers	Total premium received by life insurers	Percentage of commission with respect to total premium
2022-23	42142	775000	5%
2021-22	35887	693000	5%
2020-21	32994	629000	5%
2019-20	31192	573000	5%

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5 Comments

Money Matters · 9 months ago `

Hi, if possible please share break up of ULIP and traditional policies.

Ashim Jana · 9 months ago `

5% on total premium ( Fresh + Renewal ) is too high . And also check commission+ total exp done by insurance companies with respect to fresh premium

Sham Kumar Saini · 9 months ago

Please consider the ammount of ammount, time an agent spent on his training, gaining knowledge to update himself so that he can solicit the appropriate policy, the required insurance cover and foresee the future need analysis of his esteemed customer. And please consider his expenses which shall occur on visiting client and office to render proper services to his esteemed customers through out the policy term. A professional agent/advisor has to be updated and always in the market and among customers and to visit office on regular basis which results into quite a bit of expenses. So please have a holistic view. Don't just go by the figures. Thank you.

I am of the view that our customers are the supreme. Expenses must be minimal with maximum optimisation of work practices so that maximum benefits can be passed on to our esteemed customers. Expenses on management too must be utilised with maximum optimisation then only more Profits can be earned and passed on to our esteemed customers.

Dr Prasad Dahivelkar · 9 months ago `

No Comments

Jui Dahivelkar · 9 months ago `

Life insurance is Upfronting the commissions on New Policies. The average Upfront commission for traditional policies is more than 25% of Net First Year Premium. ULIP Policies normally pay 5-8% of Upfront commissions. If a MF distributer is getting a Trail Commission of say 0.5% to 1% and still working towards helping client for their investments, why can't there be similar brokerages for Life Insurance Agents. This will increase the Traditional Product Returns and help clients in turn. Clients will also Stop Thinking that, Insurance Agents are Helping Themselves and NOT Helping the Cause of Clients.

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