Commission paid on life insurance

Dear Mr Tan

In your blog, you said that an insurance agent earns an average of $1,000 for selling a life insurance policy? Is this cost charged to the policyholder in the premium? It is a lot of money. Why should the insurance be so costly?

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REPLY:

The actual commission depends on the size of the policy and the type and duration of the policy. It may also vary by insurance company. I have made an estimate of the average commission based on the policies sold in the market.

The agent needs to be paid this level of commission, as it takes a lot of time to look for a customer, to explain the product and to convince the customer to buy the insurance policy.

Some companies pay lower commission to the agent, and reduces the premium paid by the customer.

You can find out what is being charged from the sales illustration given to you at the point of sale.

Some insurance companies are reducing the commission for new products that are being introduced through new channels (such as the internet or directly from their office.