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Contrary to popular belief that life insurance agents and intermediaries earn commission in at least two digits, IRDAI data reveals that the commission paid to agents and intermediaries by life insurance companies with respect to the total premium (new business premium + renewal premium) was little over 5% in FY 2023.
The data shows that agents and intermediaries earned gross commission of 5.41% of the total premium in FY 2023.
Of the total premium collection of Rs.7.83 lakh crore received by life insurance, insurance companies paid gross commission of Rs.42,322 crore to agents/intermediaries in FY 2023. 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. The data shows that while the life insurance industry paid 20% of the total premium received during FY 2022-23 for regular premium policies, it paid just 0.61% of the total premium to agents/intermediaries on single premium policies sold in FY 2023.
Further, agents and intermediaries received gross commission of around 4% in FY 2023 on renewal premium.
Notably, the entire life insurance industry recorded net profit of Rs.42800 crore which was roughly equal to the gross commission paid to agents and intermediaries.
In FY 2021-22, life insurers paid gross commission of Rs.36,000 crore, which was also 5.18% 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 around 5% of the total premium received by life insurers.