As with any field, the first thought many people have when trying to shift careers or aspire to join one is to see how it will make money. The answer to this question might differ based on several factors, so let us explore how an insurance agent earns money and how the sales commission system works for them.
What kinds of insurance agents are there?
For those who don’t know the role played by insurance agents, an insurance agent or advisor is someone who identifies the best plan for an insurance purchaser’s needs based on their budget and helps complete the application to buy one.
There are typically two kinds of insurance agents. This involves someone working for a single insurer who sells only a single product and an independent agent who is not beholden to one company and can pick and choose different plans to create one which best suits the customer’s needs. Â
1.    Internal insurance sales agent
An internal agent is a full-time employee of an insurer and offers plans only from that insurer. They are typically provided sales commission along with a salary and other benefits.
2.    Independent insurance agent
An independent insurance agent is contracted with several insurers and can offer a custom plan based on these offerings to best suit the purchaser’s needs.
Both of these types have different benefits and disadvantages associated with each of them. It also impacts how much you can earn as an agent.
How to become an insurance agent?
While some agents represent a single insurer, other independent agents represent multiple insurers at a time. There are a few eligibility requirements to become an agent.
These criteria include being at least 18 years old and, based on your residence, completing at least 10th grade if you are from a rural location and 12th if you are from an urban area. They must also pass a simple exam to be certified by the IRDAI.
The following are the steps to follow to become an agent in 2024:
1.    Decide on the insurer
You need first to find an insurer who provides good benefits and flexibility. When I entered this space, I joined as an agent for Niva Bupa and was extremely happy with how they treated us and the benefits they offered.
2.    Register on the website
Once you have selected the insurer, log on to their website and fill out the insurance agent application form.
3.    Training
After filling out the form with basic details, you must complete online or offline basic training as mandated by the IRDAI. This training usually takes around 100 hours and can be completed in 3-4 weeks.
4.    Pre-licensing Exam
After completing the training and receiving a certificate, you must pass a pre-licensing exam called the IRDA exam or IC-38. The exam is conducted online, takes about an hour, and has 50 questions, out of which you need to get at least 17 right.
5.    Post licensing
After completing the exam and scoring at least 17, you will be given a license and be eligible to work as an insurance agent.
How do agents make money?
Agents make money in three ways, salary, commission, and bonuses. Typically a captive agent earns money through all of these in the form of a fixed and variable component. Independent agents may not have any fixed salary component unless they work for a larger organisation like an insurance broker.
How does sales commissions work?
Sales commissions work in two ways. They are typically upfront commissions and residual commissions.
- Upfront Commissions are, as the name might suggest, offered at the time of the initial sale. This is typically prevalent in the Health Insurance and auto insurance sectors.
- Residual Commissions are periodic income typically prevalent in cases where the policy is renewed every year. This is usually given in the life insurance sector.
This is typically how sales commissions work for insurance agents.
How much commission insurance agents make?
With a recent IRDAI decision to lift commission limits, the sky is the limit, and it depends on the insurer to decide on how much commission they offer to their agents. The typical rate for commission, though, is between 10-20% of the premium paid by the customer, and usually, it is 15% for most companies.
Conclusion
Now that you know all these details, whether you are an aspirant or looking to switch jobs, becoming an insurance agent is a great opportunity. Not only does it enable many agents to be independent and earn a secondary source of income, offering job security, but it also helps in other ways, such as communication skill development and marketing and sales tactics development
