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A common perception is that life insurance agents and intermediaries earn commission in at least two digits of percentage. However, an analysis of commission income paid by life 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 6% of the total premium in FY 2024.
Of the total premium collection of Rs.8.29 lakh crore received by life insurance, insurance companies paid gross commission of Rs.51,524 crore to agents/intermediaries in FY 24. (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.
Interestingly, while the gross commission income of agents and intermediaries has increased over the three financial years in absolute terms, the percentage of gross commission to the total premium has not changed much in the corresponding period.
In FY 2023, life insurers paid gross commission of Rs.42,322 crore, which was also 5% of the total premium received.
IRDAI said, “During 2023-24, life insurers paid a total amount of Rs.51,524 crore as commission. The commission expenses ratio (commission expenses expressed as a percentage of premium) increased to 6.21% in 2023-24 from 5.41% in 2022-23. However, total commission outgo increased by 21.74 % (total premium growth 6.06 %) during 2023-24 as compared to previous year.”
