FAQ - About Insurance Agents

Question
What's the commission an agent receives when I buy a policy?

Answer
Insurance companies offer different commissions to different agents. The average commission paid to an insurance agency for a commercial auto, property or liability policy is about 15%. Some companies pay some agents 20%.

Workers' compensation policies carry a much lower commission - 5% to 7%. Directors and officers insurance commissions range from 7% to 15%. Insurance included in special industry programs may carry a lower commission to the agent as does excess and surplus lines coverage.

The general trend is to lower commissions (as a percentage of premium) to agencies. Insurers are under pressure to reduce expenses - agents represent a huge percentage of the non-claims expenses of an insurance company.

Individual producers usually receive a percentage of the commission to the agency. For new accounts the agent may get half the agency's commission. When an agent renews a policy he or she may get 15% to 25% of the commission. Every agency has a different plan - some agents are paid a salary others may be paid exclusively on a commission basis. Programs even vary within agencies.

In addition to commissions, insurance agencies are paid overrides and bonus commissions based on growth and new sales goals. Most insurers pay year-end "contingent bonuses" that are based on total sales volume (with a particular insurer) and claims payouts.

Question
Do insurance agents represent the insurance company or the insurance buyer?

Answer
Well, kind of both. The term agent refers to the individual's relationship to the insurance company. The agent is an agent of the insurer. The person from whom you buy your insurance also has an obligation to you though. It is assumed that they will be open and honest with you about the policies they sell. Most insurance agents work hard to make sure they are doing what is right for their client, the insurance buyer.