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Commission

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Definition:

The commission is the incentive that the insurance agents or the sales representative receive after selling the insurance policy, be it life or non-life.

Description:

The commission is paid as a percentage of the premium under the insurance policies. Paying commission is like paying rewards to the agents who made efforts to convert the sales.

The commission is paid only once a year, when the premium is paid annually.

The commission under the policy depends on two factors that include:

Type of the policy
Term of the policy

The commission is also computed based on these terms:

For 15 years, the maximum commission an agent gets is approximately 25%.
After the 4th year, the commission is cut down to 5% approximately.

Commission distribution is based on these type of the policies:

Type of Premium Payment	Commission
Single Premium Payment Policy	2%of individual life product 7.5% for individual pure risk products. 2% for immediate annuity and deferred annuity products 5% for group-pure risk products.
Pure Risk Regular Premium	40% for the first year 10% for every renewal premium
Investment Based Regular Premium Product	15% for the first 5 years. Over 12 years the commission will be 35%. 7.5% renewal premium per annum. 42.5% for the 12th year onwards.

Example:

Puneet is a life insurance agent who sold a regular premium term plan to Rahul. The premium under the term plan paid by Rahul was Rs.10,000/- excluding GST. The commission for the first year earned by Puneet will be 40% of Rs.10,000/- which will be Rs.4,000/-. The renewal commission will be 10% issued until the policy is renewed.

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