How much commission does LIC pay to agents, know the full details

Life insurers paid Rs 42,322 crore to agents in 2022-23, LIC paid 27.61% as commission from first-year premium

Despite growing popularity of online premium payments and buying policy directly through insurance companies the cut for agent commissions have gone up. In the financial year 2022-23, life insurers paid Rs 42,322 crore as commission to agents, which is 5.41% of the total premium collected during the year, Insurance Regulatory and Development Authority of India (IRDAI) data showed.

Commission expenses expressed as a percentage of premium increased to 5.41% in 2022-23 from 5.18% in 2021-22. As per the IRDAI annual report, commission outgo of life insurance companies surged by 18% while premium increased by around 13% in 2022-23, year-on-year.

LIC paid 27.61% as commission from first-year premium, this is more than one percentage point higher than the previous year. This means every Rs 100 collected as first-year premium, Rs 27.61 went to agents.

It is important to note that this is the average amount of commission paid to the insurance agents. Hence, some policies can have higher commissions and others may have lower commissions. Typically, term insurance policies have lower commissions as compared to endowment policies.

Out of the 24 life insurers in operation during 2022-23, 17 companies reported profits. Profits of life insurance industry grew by 452% in 2022-23 with profit after tax of Rs 42,788 crore as against Rs 7,751 crore in 2021-22.

The public sector reported increase in profits by 800% while private insurers together reported an increase in profit by 72.36%.

The operating expenses of the life insurers increased by 25.21% to Rs 89,443 crore in 2022-23 and operating expenses ratio (operating expenses as a percent of gross premium underwritten) of life insurance industry increased from 10.31% in 2021-22 to 11.43% in 2022-23.

Commission expenses and operating expenses constitute a major part of the total expenses.

High operating expenses have taken toll on insurance penetration in the country. Life insurance penetration in India declined from 3.2% in 2021-22 to 3% in 2022-23, as per Swiss Re Sigma Report.

Non-life insurance sector penetration remained steady at 1%. India’s overall insurance penetration reduced to 4% in 2022-23 from the level of 4.2% in 2021-22, the insurance regulator noted in its annual report.

LIC Agent commission rates for 1st Year :

  • Money Back plan: 20%
  • New Endowment plan: 25%
  • Term Plan: 25%
  • Pension Plan: 2%
  • Child Plans: 25%
  • Health Insurance Plan: 25%

Pallavi Shree

Pallavi Shree is a finance professional with over 15 years of experience. She has worked with leading multi-national companies including BNY Mellon, Bechtel Corporation, Kronos Solutions and Genpact. In her part time, she loves to write on economy, finance and issues related to women empowerment.

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