It is often felt and claimed particularly in the press/media that Life Insurance Agents' Commission is astronomical and some

The Commission paid by LIC of India to their agents ranges from 2 % to 35 % on the irst !ear "remium# Coming to the
rene$al Commission% the same drastically comes do$n from &ero to '#5 % and from the (th year &ero to 5 % as )inimum and
the fact that the "olicy needs to be ser*iced by the Agent for $hate*er term of the "olicy#
same to the e+tent of ,- % on the irst !r "remium# An o*erall 35 % is payable pro*ided the Agent is .ligible for /onus#
0ther$ise the ma+imum Commission payable remains to be 25 % on the irst !ear "remium "aid#
In all other cases, the Commission payable is much lower. An effort is made here to demystify the misnomers
on the issue of Commissions.
Let's ta1e an e+ample of a 2- year policy for 2s# 2----- 3um Assurance and the )a+imum Commissions "ayable thereunder4
or ease of calculations and understanding the premiums are rounded off $hich is about the a*erage premium for insurable Ages#
The Agent is responsible for the Sum Assured, the Death or Maturity Value of the olicy and not for the remium Income
of the olicy. In !iew of fact that olicy "older Considers the olicy for its !alue and not for a yearly premium, the
Computation of Commission payment should be on the Total Sum #nder Consideration alone.
as a befitting tribute to the 3enior Citi5ens# 0ften ser*ices issues on these policies arise and Agents gracefully ta1e them up#
"ere is an e$ample where highest Commission is paid to %IC Agents
Annual &irst 'ear (nd ) *rd 'r +th (,th 'r Actual Actual '(-'* Actual '+ to '(,
remium Commission Commission Commission Commission Commission &or ./ 'rs. aid o!er
0s. as a 1 of as a 1 of as a 1 Commission a period
remium remium &' ayable of (, 'rs.
0s. 0s. 0s. 0s.
.,,,, *2 /.2 2 *2,, .2,, 32,, .*2,,
C4MMISSI45 0AT6S A'A7%6 T4 %IC A865TS
6ournalists ha*e e*en gone to the e+tent of describing Agents $ith complimentary ad6ecti*es such as "Commission Hungry"
and some others further graduated us as "Leeches".
)a+imum only on the "remium paid# 7here*er there is 8o 2ene$al "remium 8o 2ene$al Commission is payable inspite of
or .ndo$ment 8atured "olicies $ith .2 year or more term a first year commission of 25 % and a /onus Commission on the
Commissions are paid as a percentage of the remia actually paid it is no $here mentioned that the Insurers pay it out of the
money paid by the "olicy 9olders e+cept in the case of :LI"s
All 3ingle "ension "olicies sold in ,;<< to ,;;5 under =ee*an >hara and A1shay paid Agents 2 % on issuance of "olicy#
In 2--( the ?arist "ension /ima !o6na $as agressi*ely mar1eted by the LIC Agents $hich ga*e them only -#, % Commission
Total Comn
ayble 0s. ayble 0s.
4n final analysis, the following findings emerge out
Sum olicy Commission Commission Annual Annual
Assured Maturity Value as a 1 of as a 1 of &ee aid &ee aid
0s. 0s. Sum Assured Maturity Value as 1 of as 1 of
o!er (, 'rs. o!er (, 'rs. Sum Assured Maturity Value
(,,,,, +,,,,, .*2,, 9 (,,,,, .*2,, 9 +,,,,, :./2 9 (, *.*/2 9 (,
:./21 *.*31 ,.**1 ,../1
Thus no greater than -#,' % @$hich is the highestA is paid per annum to the Agent as a percentage of the amount he is responsible for#
The Agent is paid higher commission in the first year in *ie$ of the fact that unless he chases a number of people% one policy can't
The abo*e calculations are based on the 9ighest Commissions payable# I ha*e sold hundreds of "ension "olicies in the past t$o
decades $ith first B only Commission of 2 % for $hich Agents are ser*ing the "olicy 9olders for decades together $ithout any rene$al
belie*ed Insurance is a 2elationship /uilding "rocess and en6oyed educating people and ma1ing them do good things# )any do the
same in this profession# It is li1e a Cospel# 8ot e*eryone li1e the idea of parting $ith money at present though it is for their o$n future
and the future of their o$n 1ith and 1in# 7e come across hundreds of suspects% Dualify do5ens of prospects from $hom a fe$ "olicies
result# It is for this reason the first year commission is high# Life Insurance Agents are helpful guides for people# They ne*er e+pect
2elationship ruthlessly and $ant the Agents to Charge the Customers#
"olicies issued under this plan are still in force# The Life Insurance Agents ha*e brought in more than 2s# 3--- Cr# "remium under
2s# 3--- Cr# "lus is brought in by the Independent Agents at their o$n cost and not for any earning#
If an estimated 2s# ,5---/E Cr# Is paid as >istributor Commission on an o*erall fresh premium going beyond 2s# 2--%--- Cr#% $hat big
deal is it considering the fact that the Agents are ser*icing 2s# (-%--%--- Cr# 7orth Life Co*er for the "olicy 9olders and is e+pected
to continue ser*ing for a life timeF )ay Cood 3ense pre*ail on the rulers and regulators to ensure that the basic financial fabric of
S#0I S66TA 0AM
M -;. ;*; :(( (+::
Agent, %IC of India, "yderabad
be sold# All of us should remember that "Insurance is a subject matter of solicitation". In $hich other $ay the Agents' efforts
of gogetting can be compensatedF The Country needs long term capital for funding its e*er increasing infrastructure needs#
commission and I ne*er grudged about it nor e*en thought of them till the 3$arup Committee started counting numbers# I ha*e al$ays
to charge their customers for any ser*ice rendered# The 2elationship matters most# Today the so called "andits are trying to 1ill this
!et another glaring e+ample of Agents selfless contribution to this country is the success of ?arista "ension /ima !o6na introduced
by LIC of India for a limited period of 3 to ( months in $hich the 3enior Citi5ens $ere gi*en a life long ; % p#a# pension# )illions of
this plan# T9. C0))I33I08 "A!A/L. :8>.2 T9. "LA8 7A3 A 08. TI). -#, %# LIC Agents are ser*ing heir "oicy 9olders
$ith a smile e*en today as a fitting tribute to the 3enior Citi5ens# 8o ban1 Agent had mobilised any money under the scheme# .ntire
the Country is not disturbed on account of their thoughtless decissions#