Many of you may think, “Do insurance agents work on commission?” And if yes, how much do they make. Operating insurance agencies can be a complicated business as hard selling tactics need to be deployed for reaching out to new customers every day over and above managing existing clients. For motivating staff members or sales representatives to enhance performance, agencies have to share commissions secured from insurance sales.
An agency may sell car, home, health and life insurance products for earning commissions from multiple companies. To that effect, any firm has to device a payment structure that serves to increase business revenues.
Now the question is, “How much commission do insurance agents make?” Well, that might depend on the following factors:
Since insurance policies are long term commitments, customers have to pay premiums every year for keeping coverage afloat. Agencies earn residual commission year over year until at least 10 years. This is over and above the initial commission for each policy that is sold. The residual income may be shared with employees working for the agency.
Should you think, Do insurance agents make commission? you need to know that things don’t end with residual incomes of agencies. While selling of car and health insurance policies ensures residual income, life insurance products may attract upfront payments. For annuity and whole life term insurance products, such upfront payments can fetch up to 10% commission on one time premium.
New start-ups often capitalize on upfront commissions instead of residual income as they are in need of cash to cover up for the operational costs. Some insurers have chargeback provision as part of contract which allows the companies to recover commission if some clients cancel their policies within a specified time period or there are policy lapses. Similarly, in the case of annuity contracts, chargeback provision may enable insurers to reclaim funds annually from the date of purchase of annuity. Agency might have to bear losses and may reclaim commission paid to sales persons in such a case.
According to the U.S Bureau of Labour Statistics, the average commission for insurance agent or median salary in the year 2016 was around $49,990.
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