Depending on various factors, the commission paid to an insurance agent varies widely. It depends mainly on the type of insurance the agent sells and the incentive policy of their company. While some agents receive salaries, most agents earn a large proportion of their incomes from commissions. So, it is tough to make a living off commissions alone if there is no proper support.
How agents get paid
While some agents earn a salary and a bonus, others depend entirely on commissions.
Insurance agent salary
The median pay for an insurance sales agent was $50,940 per annum in 2019. The best-paid 25 percent made $77,460 that year, while the lowest-paid 25 percent made $36,520. Notably, an insurance sales agent sells different types of insurance and not just life insurance; so, the salary can vary depending on the industry type. For example, a personal financial advisor who sells life insurance can earn much more than an auto insurance seller does.
How commissions work
Many criteria decide how an agent is paid. Some of the critical factors include the size of the client base, the experience of the agent, and so on. Agents who sell more than one type of insurance earn more. Commissions also depend on the type of insurance agents sell. For example, an agent selling life insurance may expect between 30 and 90 percent of a client’s first-year premium as a commission.
In addition, top sellers can earn 100% of the total premium in the first year as commission. For the subsequent years, they may earn 2% to 5% commission from the second to the fourth year, respectively. These payments may stop later.
Notably, agents get a low commission on premium renewals. The commission agents make also depends on the insurance companies they work with. Some agents work with only one company. These agents are known as captive agents and earn less. On the other hand, some insurance companies have lucrative bonuses compared to others. Moreover, agents who join cluster groups may make more generous commissions because members first pool and then split their bonuses. However, each cluster group has its own rule to split commissions, so do your due diligence before joining any such group.
Remember, an agent may have to pay back up to 100% of the commission to the life insurer if the policyholder lapses the policy in the first or second year. But if the policyholder continues to pay the premiums, agents are paid a small portion of the commission.
What do insurance companies should do to stand out?
The success of an insurance company depends on the performance of its insurance sellers. So, to stand out from the competition in the insurance industry, you need to motivate your sales agents to be top performers. Now that you know how incentives play a critical role for any insurance agent, structure a strong incentive plan for your agents. Although it’s easy to manage an incentive plan for a handful of agents, it might become challenging to maintain multiple sheets to keep a tab on your agents’ performance and commission earned if your business is growing.
Implementing centralized incentive management software can help you manage your incentive program easily. You can gain easy access to detailed reports and interactive dashboards that allow you to identify the top performer and pay her or his commission.
Software for tracking sales ensures accurate and timely compensation payments, helps you track the performance of your agents, and streamlines the reporting process. It allows you to reduce turnover by centralizing data in one place for effective sales network management. You have instant access to information on current sales and commissions due for each unit. An automated commission tracking software like Blitz can simplify all your commission payments requirements.