January 14, 2009
When I first published this article on Ohio Insurance Forum I ended the article with the comment: ” My advice: if you want to work in sales, find a more lucrative profession ” .
This comment raised the ire of several established insurance agents. Tomorrow I will publish their response to my opinion.
Q - How much commission do Insurance Agents make? How do I start an agency?
A - First things first, you’ll need to get licensed in your state and other states you want to do business in(not too hard) you’ll need appointment with good companies that sell marketable policies (a little harder) then they’ll require you to sign a producers agreement (better look both ways before crossing that street). Life policies usually pay between 30 and 100% of first year premium, so let’s say a policy is $40 / month = $480/year then first year commission = $144 to $480. Some companies pay renewal commission but it’s usually a smaller %. P&C pays around 15% for new and renewal business. Some more, some less, others have smaller renewals, whatever, but let’s use 15% for computations. Then how much you make depends on how much premium you write. Say you write a medium sized trucking company for $2M / year then 15% = $300K/ year - a soft living. If you sell personal lines, and say average HO in your state = $600/year and average auto = $1,800/year then to get to $300K you’ll need 833 1/3 customers paying and renewing every year. Since either of these are going to work you to death, you’ll need to hire some help, pay for an office, buy supplies, marketing, E&O insurance and so on.
You’ll also be on your own for health insurance, retirement savings and other employer benefits. After a few years in the biz, companies can pay other bonuses: profitability (keep your claims down) retention (keep your customers) and growth (keep them coming to us!!) this can add maybe another 5-10% commission to your bottom line. Needless to say, unless your dad owns an established insurance agency, this won’t be easy. You’ll work years and your success is not entirely in your hands, you’re partners with your insurance companies.
Typically, what is the commission structure the agency principle pays to the agent? I have heard 60%-70% (of the 15% you mentioned), but is that for renewal business as well? Also, what is fair when it comes to the the agents book of business? I have heard some can walkaway with 50%. I am in Texas. Thanks for your help!
Structures vary depending on the line of insurance business you are writing, the carrier, and the agency you are partnered with.
The best way to find out this information is to call around different independent agencies and health insurance General Agents to find out what’s typical. So much I can get into here but I’d be writing for a week.
why cant anyone just come up with a “about” figure. lets say ,
i have progressive auto insurance, its 100 per month. how much does the insurance agency get? 85% of 1st yr and 15% of residual?
Progressive pays a little low on the commission scale. Around 10% if I remember.
So $100 premium; agent gets $10 up front and $10 on renewal. Most auto policies are 6 month term so renewal premium gets paid every 6 months.
What does it matter what the commission your agent is paid. It does not matter, state depending, if you go through the agent or their online sales website you still pay the commission.
Since you are paying for an agent if you get one or not you kind as well get their service.